CLA-2 RR:CR:GC 961259 DWS
Mr. Robert E. Burke
Barnes, Richardson & Colburn
200 East Randolph Drive, Suite 7920
Chicago, IL 60601
RE: Reconsideration of HQ 957491; PC-POS Keyboard with MSR
Dear Mr. Burke:
This is in response to your letter dated December 5, 1997,
to the Port Director of Customs, Chicago, Illinois, on behalf of
Preh Electronics, Inc., requesting reconsideration of HQ 957491,
dated July 31, 1996, specifically concerning the classification
of the personal computer (PC) - point-of-sale (POS) keyboard with
a magnetic stripe reader (MSR) under the Harmonized Tariff
Schedule of the United States (HTSUS). Your letter was referred
to this office for a response.
Pursuant to 625(c)(1), Tariff Act of 1930 [19 U.S.C.
1625(c)(1)], as amended by section 623 of Title VI (Customs
Modernization) of the North American Free Trade Agreement
Implementation Act, Pub.L. 103-82, 107 Stat. 2057, 2186 (1993),
notice of the proposed modification of HQ 957491 was published on
November 4, 1998, in the CUSTOMS BULLETIN, Volume 32, Number 44.
No comments were received in response to the notice.
FACTS:
The PC-POS keyboard with MSR (referred to as "Sample C3" in
HQ 957491) is a QWERTY-style keyboard with housing and interface
electronics containing a slot for the MSR. It also consists of
additional "rows and columns" keys which may be programmed to
accommodate a customer's unique specifications, such as POS
applications. You state that the keyboard is specifically
designed for use with IBM or
IBM-compatible PCs. The keyboard also includes an additional
"wedge", which extends the flexibility of both the keyboard and a
PC using the keyboard to various other external applications,
such as laser scanners.
ISSUE:
Whether the PC-POS keyboard with MSR is classifiable under
subheadings 8471.92.20 (1994) and 8471.60.20 (1998), HTSUS, as a
keyboard, or under subheading 8537.10.90, HTSUS (1994 and 1998),
as an other board for electric control or the distribution of
electricity.
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification is determined according to the
terms of the headings and any relative section or chapter notes.
Because HQ 957491 dealt with the classification of the
keyboard entered both before (1994) and after amendments to
chapter 84, note 5, HTSUS, were implemented in 1996, we will
provide the proper classification of the keyboard for 1994 as
well as under the current tariff schedule.
1994
The HTSUS provisions under consideration are as follows:
8471 Automatic data processing machines and units thereof; *****:
Other:
8471.92 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:
Other:
8471.92.20 Keyboards.
Other:
Other:
8471.92.88 Other.
* * * * * * * * *
8537 Boards, panels (including numerical control panels),
consoles, desks, cabinets and other bases, equipped with two
or more apparatus of heading 8535 or 8536, for electric
control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, other than
switching apparatus of heading 8517:
8537.10 For a voltage not exceeding 1,000 V:
8537.10.90 Other.
* * * * * * * * *
In part, chapter 84, note 5, HTSUS, states:
(A) *****
(B) Automatic data processing machines may be in the form of systems
consisting of a variable number of separately housed units. A unit is
to be regarded as being a part of the complete system if it meets all
of the following conditions:
(a) It is connectable to the central processing unit either
directly or through one or more other units; and
(b) It is specifically designed as part of such a system (it
must, in particular, unless it is a power supply unit, be
able to accept or deliver data in a form (code or signals)
which can be used by the system).
Such units entered separately are also to be classified in heading
8471.
Heading 8471 does not cover machines incorporating or working in
conjunction with an automatic data processing machine and performing a
specific function. Such machines are classified in the headings
appropriate to their respective functions or, failing that, in residual
headings.
In HQ 957491, we held the subject keyboard to be
classifiable in heading 8537, HTSUS, specifically under
subheading 8537.10.90, HTSUS. In precluding classification of
the keyboard in heading 8471, HTSUS, we stated that:
Samples *** C3 (the PC-POS) are not specifically designed as parts of
ADP systems, are used with machines performing a specific function, and
therefore, cannot be classified as ADP units. ***** Sample C3 has
additional (programmable) rows and columns keys and a magnetic stripe reader
that makes it particularly suitable for POS applications. It also includes an
additional "wedge," which provides the capability to connect different
peripherals, such as a laser scanner. These samples cannot, according to
note 5, be classified as units for ADP machines under heading 8471,
HTSUS (1994). See, e.g., HQ 955868, dated May 20, 1994 (wherein a POS terminal incorporating an ADP machine was classified as a cash register
under heading 8470, HTSUS); HQ 087513, dated November 5, 1990 (wherein a
laser machinery center with a "computer numerical control" (CNC)
was classified as a laser machine tool under heading 8456, HTSUS).
You state that the keyboard connects directly to the central
processing unit (CPU) of an IBM or IBM-compatible PC, and can
function only when connected to an operating PC. Also, the
keyboard relays data to and receives information from the PC.
When the PC user depresses a key on the keyboard, the keyboard
sends a signal to the CPU; this signal is then interpreted and
used by the PC according to the automatic data processing (ADP)
application utilized by the system user. Based upon this
information, we now agree that the subject keyboard meets the
terms of chapter 84, note 5(B), HTSUS, and is described as an ADP
unit in heading 8471, HTSUS, specifically under subheading
8471.92.20, HTSUS.
HQs 955868 and 987513 are cited in HQ 957491 as precedent
for the exclusion of the keyboard from classification in heading
8471, HTSUS. However, both of those rulings dealt with the
classification of machines (POS terminal and laser machinery
center) incorporating computer-type devices. It is now our
position that these rulings are therefore distinguishable from
the present situation concerning the classification of a keyboard
which is, in its condition as imported, specifically designed for
use with a PC, regardless of the end use of the PC.
We also agree that the keyboard meets the terms of heading
8537, HTSUS, which is broad in coverage. The keyboard is a
board, containing switches of heading 8536, HTSUS, for electric
control or the distribution of electricity.
In part, GRI 3(a) states that:
[t]he heading which provides the most specific description shall be
preferred to headings
providing a more general description *****
It is our position that heading 8471, HTSUS, more
specifically describes the keyboard then does heading 8537,
HTSUS. The keyboard must meet the terms of heading 8471, HTSUS,
and therefore chapter 84, note 5, HTSUS, to be deemed an ADP
unit. We find that the language of heading 8537, HTSUS, is not
as stringent a test. Therefore the subject keyboard is
classifiable in heading 8471, HTSUS.
However, we must determine in which provision of heading
8471, HTSUS, the keyboard is classifiable. Keyboards are
specifically classifiable under subheading 8471.92.20, HTSUS, and
MSRs are classifiable under subheading 8471.92.88, HTSUS.
GRI 6 states that:
[f]or legal purposes, the classification of goods in the subheadings of
a heading shall be determined according to the terms of those
subheadings and any related subheading notes and, mutatis mutandis, to
the above rules, on the understanding that only subheadings at the same
level are comparable. For the purposes of this rule, the relative
section, chapter and subchapter notes also apply, unless the context
otherwise requires.
Section XVI, note 3, HTSUS, states that:
[u]nless the context otherwise requires, composite machines consisting
of two or more machines fitted together to form a whole and other
machines adapted for the purpose of performing two or more complementary
or alternative functions are to be classified as if consisting only of
that component or as being that machine which performs the principal
function.
As the subject keyboard also contains a MSR component, it is
our position that it is a composite machine. GRI 6 allows us to
apply section XVI, note 3, HTSUS, the note which governs the
classification of composite machines in section XVI, HTSUS, at
the subheading level.
Based upon section XVI, note 3, HTSUS, the keyboard is to be
classifiable as if consisting only of that component which
performs the principal function. Therefore, we must determine
whether the keyboard or the MSR functions of the keyboard
constitute its principal function. Based upon the literature
provided and the arguments presented, although the MSR is
provided to enhance the capability of the keyboard, the principal
function is that of the keyboard itself. The merchandise may be
used with a PC without ever utilizing the MSR or "wedge"
components. Therefore, the subject keyboard is classifiable
under subheading 8471.92.20, HTSUS. See NY 872612, dated March
27, 1991.
1998
The HTSUS provisions under consideration are as follows:
8471 Automatic data processing machines and units thereof; *****:
8471.60 Input or output units, whether or not containing
storage units in the same housing:
Other:
8471.60.20 Keyboards.
* * * * * * * * *
8537 Boards, panels, consoles, desks, cabinets and other bases,
equipped
with two or more apparatus of heading 8535 or 8536, for
electric control
or the distribution of electricity, including those
incorporating instruments
or apparatus of chapter 90, and numerical control apparatus,
other than
switching apparatus of heading 8517:
8537.10 For a voltage not exceeding 1,000 V:
8537.10.90 Other.
* * * * * * * * *
As was stated in HQ 957491, in 1996, chapter 84, note 5,
HTSUS, was substantially modified. It now states:
(A) *****
(B) [a]utomatic data processing machines may be in the form of systems
consisting of a
variable number of separate units. Subject to paragraph (E)
below, a unit is to be
regarded as being a part of a complete system if it meets all the
following conditions:
(a) It is of a kind solely or principally used in an automatic
data processing system;
(b) It is connectable to the central processing unit either
directly or through one or more other units; and
(c) It is able to accept or deliver data in a form (codes or
signals) which can be used by the system.
(C) Separately presented units of an automatic data processing machine
are to be
classified in heading 8471.
(D) Printers, keyboards, X-Y coordinate input devices and disk storage
units which satisfy
the conditions of paragraphs (B)(b) and (B)(c) above, are in all
cases to be classified as
units of heading 8471.
(E) Machines performing a specific function other than data processing
and incorporating
or working with an automatic data processing machine are to be
classified in the headings
appropriate to their respective functions or, failing that, in
residual headings.
In HQ 957491, we again held the subject keyboard to be
classifiable in heading 8537, HTSUS, specifically under
subheading 8537.10.90, HTSUS. In precluding classification of
the keyboard in heading 8471, HTSUS, we stated that:
[n]ote 5(D) must be read in light of note 5(E) to chapter 84, HTSUS.
Note 5(B) to chapter 84, HTSUS, provides that a unit is to be regarded as
being a part of an ADP system if it meets all the listed conditions,
"subject to note 5(E) to chapter 84, HTSUS." Note 5(E), which prior to 1996
was found following notes 5(A) and 5(B) under note 5 (see above), provides
that "[m]achines performing a specific function other than data
processing and incorporating or working in conjunction with an automatic
data processing machine are to be classified in the headings appropriate
to their respective functions or, failing that, in residual headings (addition
to 1996 text in bold face)." Thus, while note 5(D) negates the sole or
principal use requirement when considering the classification of
printers, keyboards, X-Y coordinate input devices and disk storage units,
note 5(E) provides a separate prerequisite to the classification of any ADP
machine and, therefore, ADP unit. To be classified as an ADP unit, a
device must be used with a machine that is considered, for classification
purposes, an ADP machine. See chapter 84, note 5(A), HTSUS (1994/1996)
(defining "automatic data processing machines" for purposes of heading 8471, HTSUS).
*****
The classification of sample C3 (the PC-POS), in light of the 1996
amendments, is a more difficult determination. However, it is our opinion
that sample C3, although it can be connected to a standard, desktop PC,
cannot be classified as an ADP input unit under heading 8471, HTSUS. Although "principal use" is not required, some degree of "capacity" for use
with an ADP machine, in light of the purpose of the 1996 amendments, must
be required. To be "capable" of being used with an ADP machine, a device
must be actually, practically and commercially fit for such use. Such
"capacity" requires more than a casual, incidental, exceptional or possible
use.
Sample C3 has additional (programmable) rows and columns keys and a
magnetic stripe reader that makes it particularly suitable for POS
applications. It also includes an additional "wedge," which provides the
capability to connect different peripherals, such as a laser scanner. Because
of its special design, sample C3 costs a great deal more than a
"standard" desktop keyboard (approximately ten times more than the
"standard" keyboard). Moreover, sample C3 provides certain features (i.e.,
many programmable function keys; "wedge") that would not be used if connected to a standard, desktop PC. Thus, while sample C3 can be connected
to a standard, desktop PC, it is highly unlikely that one would purchase it
for such use, as it is not practically and commercially fit for such use.
While counsel for Preh has provided pictures of sample C3 connected to
a standard, desktop PC, it is our opinion that any such use would be merely
"casual, incidental, exceptional or possible." This type of use was not
the type contemplated by the amendments to chapter 84, note 5, HTSUS.
Accordingly, sample C1 [sic], *** is classifiable under subheading
8537.10.90, HTSUS.
It is our understanding that the 1996 addition of note (D)
to chapter 84, note 5, HTSUS, was intended to be expansive, not
restrictive. Indeed, as noted in HQ 957491, for merchandise to
meet the terms of note (D), the product need not meet the "sole
or principal use" test of chapter 84, note 5(B)(a), HTSUS. We
now find that the "actually, practically and commercially fit for
such use" test created in HQ 957491 is too strict. In utilizing
such a test, it appears that an actual use requirement is
substituted for the "sole or principal use" requirement of
chapter 84, note 5(B)(a), HTSUS. Based upon information we have
received, it is our understanding that such a restrictive
substitution was not intended by the drafters of note (D).
The test for meeting the terms of note (D) should be what is
specifically required in note (D). If certain devices satisfy
the conditions of chapter 84, notes 5(B)(b) and (c), HTSUS, they
are to be classified as units of heading 8471, HTSUS. As we have
previously stated, the subject keyboard is connectable to a CPU
and it is able to accept or deliver data in a form which can be
used by an ADP machine, thereby satisfying the terms of chapter
84, notes 5(B)(b) and (c), and note 5(D), HTSUS.
We will confine the application of chapter 84, note 5(E),
HTSUS, to the subject merchandise. Based upon the information
provided, and contrary to the holding in HQ 957491, the subject
keyboard performs a data processing function, as its intended use
is to input data. In fact, it is our understanding that a
keyboard user can manually input the data from a credit card or
other card into the PC by punching the keys of the keyboard
rather than sliding the card through the MSR. Therefore, the MSR
does not necessarily have to be utilized. Consequently, because
the purpose of the keyboard is
for data input, it is now our position that chapter 84, note
5(E), HTSUS, does not preclude classification of the keyboard in
heading 8471, HTSUS. We also note that, as previously stated,
MSRs themselves are classifiable in heading 8471, HTSUS.
As we have now determined that the keyboard is described in
heading 8471, HTSUS, as an ADP unit, based upon our analysis of
the classification of the keyboard under the 1994 HTSUS (same
rules apply), it is our position that the keyboard is
classifiable under subheading 8471.60.20, HTSUS. See NY 817753,
dated January 4, 1996.
HOLDING:
The PC-POS keyboard with MSR is classifiable under
subheadings 8471.92.20 (1994) and 8471.60.20 (1998), HTSUS, as a
keyboard.
HQ 957491 is modified to reflect the reasoning herein. In
accordance with 19 U.S.C. 1625(c)(1), this ruling will become
effective 60 days after its publication in the CUSTOMS BULLETIN.
Publication of rulings or decisions pursuant to 19 U.S.C.
1625(c)(1) does not constitute a change of practice or position
in accordance with section 177.10(c)(1), Customs regulations [19
CFR 177.10(c)(1)].
Sincerely,
John Durant, Director
Commercial Rulings Division