VAL CO:R:C:V 545788 LR
District Director of Customs
San Francisco, California
RE: Application for Further Review of Protest 2809-94-100924;
automatic data processing software; mass spectrometer;
magnetic media
Dear Sir:
The above-referenced protest and application for further
review is against your decision regarding the classification and
valuation of automatic data processing (ADP) software imported by
Fison Instruments, Inc. (protestant) on November 8, 1993 and
liquidated by Customs on April 22, 1994. The protest was filed
on July 12, 1994.
FACTS:
The imported merchandise consists of a mass spectrometer
system, consisting of a mass spectrometer and magnetic media
(floppy disk) with ADP software. It is our understanding, as
confirmed by the concerned import specialist in San Francisco,
California, that at the time of importation, the software and
magentic media are actually one good. According to the
commercial invoice submitted with the entry, the value of the
mass spectrometer is XXX, the software, XXX, and the magnetic
media, XXX. Protestant entered the magnetic media and software
(total entered value, XXX) in subheading 8524.23.20, Harmonized
Tariff Schedule of the United States (HTSUS) as an other magnetic
tape recording of a width exceeding 6.5 mm, with a rate of duty
of 9.7 cents per square meter of recording surface. Protestant
entered the mass spectrometer (entered value, XXX) under
subheading 9027.30.4080, HTSUS, as an electrical spectrometer,
with a rate of duty of 4.9% ad valorem. The entry documents also
show a charge of XXX for training and installation, identified as
a non-dutiable charge (which presumably applies to the software).
Upon liquidation, Customs classified both the mass
spectrometer and the software under subheading 9027.30.40, HTSUS,
and applied the 4.9% rate of duty to the combined invoice value
of the mass spectrometer and the software (XXX). Customs
classified only the magnetic software media under subheading
8524.23.20, HTSUS, as an other magnetic tape recording of a width
exceeding 6.5 mm, with a rate of duty of 9.7 cents per square
meter of recording surface.
Although Customs appraised the merchandise based on the
invoice values provided by protestant, protestant claims that it
was improper for Customs to include the value of the software
along with the value of the mass spectrometer when applying the
4.9% rate of duty. It claims that the 4.9% rate of duty should
only be applied to the value of the mass spectrometer. It argues
that the software should be classified with the media in
subheading 8524.23.20, HTSUS, and that pursuant a GATT decision
and T.D. 85-125, duty is to be assessed only on the value of the
media. Protestant asks that the merchandise be appraised and
classified as originally submitted to Customs.
ISSUE:
Whether Customs properly applied the 4.9% rate of duty
applicable to merchandise classifiable under subheading
9027.30.40, HTSUS, to the combined value of the spectrometer and
the software.
LAW AND ANALYSIS:
Merchandise imported into the United States is appraised in
accordance with section 402 of the Tariff Act of 1930, as amended
by the Trade Agreement Act of 1979 (TAA; 19 U.S.C. 1401a). The
preferred method of appraisement is transaction value, which is
defined as the "price actually paid or payable for merchandise
when sold for exportation to the United States," plus certain
enumerated additions. 19 U.S.C. 1401a(b)(1). For purposes of
this ruling we assume that transaction value is the appropriate
basis of appraisement as represented by the values on the
commercial invoice. The dispute arises regarding the
classification of the imported software and not the method of
appraisement under 19 U.S.C. 1401a.
The Harmonized Tariff Schedule of the United States (HTSUS)
provides that the classification of articles is governed by the
General Rules of Interpretation (GRI's). GRI 1 states in
pertinent part that "classification shall be determined according
to the terms of the headings and any relative section or chapter
notes..."
Protestant does not dispute the classification of the mass
spectrometer under subheading 9027.30.40, HTSUS, as an electrical
spectrometer, dutiable at the rate of 4.9% ad valorem. The
dispute concerns only the classification of the software.
Application of the 4.9% rate of duty under subheading 9027.30.40,
HTSUS, to the combined value of the mass spectrometer and the
software is proper only if the software is classifiable under
this provision. It is not.
As provided in Chapter 85, note 6, HTSUS:
[r]ecords, tapes and other media of heading 8523 or 8524
remain classified in those heading, whether or not they are
entered with the apparatus for which they are intended.
Based on this provision, the magnetic software media is
separately classifiable from the mass spectrometer. See HQ
953383, February 19, 1993, and HQ 955053, October 4, 1993.
Moreover, because the software and the magnetic media are
actually one good at the time of importation, the magnetic media
with the software is properly classified under subheading
8524.23.20, HTSUS, as an other magnetic tape recording of a width
exceeding 6.5 mm, with a rate of duty of 9.7 cents per square
meter of recording surface. (Even if the software and media were
not actually one good at the time of importation, based on
chapter 85, note 6, HTSUS, the software and the media would be
classifiable under the appropriate provisions in heading 8523 or
8524, and not with the spectrometer in subheading 9027.30.40).
Having determined that the magnetic media with the software
is classifiable under subheading 8524.23.20, HTSUS, Customs
improperly applied the 4.9% rate of duty under subheading
9027.30.40 to the combined value of the mass spectrometer and the
software. It should have been applied to the value of the
spectrometer alone.
As indicated above, merchandise classified under subheading
8524.23.20, HTSUS, is dutiable at the rate of 9.7 cents per
square meter of recording surface rather than an ad valorem rate.
Therefore, it is unnecessary to address protestant's arguments
that based on a GATT decision and T.D. 85-124, duty is to be
assessed on the value of the media only and not the value of the
software. The duty is the same regardless of the value of the
magnetic media with software.
HOLDING:
Based on the above considerations, the merchandise was
properly classified as entered. You are directed to grant the
protest 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 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 the decision
must be accomplished prior to mailing of the decision. Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information Act
and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division