CLA-2 RR:CR:GC 962415 HMC
Mr. Jeffrey A. Meeks
Meeks & Sheppard
330 Madison Avenue
39th Floor
New York, NY 10017
RE: Sure-Med Automated Distribution System, ATC System; Other Machines and Mechanical Appliances Having Individual Functions, Not Specified or Included Elsewhere in This Chapter, Other
Dear Mr. Meeks:
This is in response to your letter to the Director, National Commodity Specialist Division, New York, dated November 10, 1998, on behalf of Baxter Healthcare Corp., regarding the tariff classification of the Sure-Med Automated Distribution System (“Sure-Med”) and the ATC System (“ATC”) under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter was forwarded to this office for a reply. We regret the delay.
FACTS:
The merchandise is the Sure-Med system and the ATC system. You state that the Sure-Med is used by medical personnel in hospitals and other health care facilities to dispense various medications, including controlled narcotics, to patients. A dispensing cabinet stores and dispenses different medications, such as pre-filled syringes, vials, oral solid medication and ampules. Each Sure-Med dispensing cabinet is able to accommodate up to three additional expansion cabinets. The dispensing cabinets are manufactured both with and without refrigeration devices. Each dispensing cabinet incorporates a keyboard, a screen and a magnetic card reader allowing interfacing with a central workstation for purposes of automatic record keeping and patient billing for each medication dose dispensed. Access to the system is by assigned password and/or proper magnetic card key.
To dispense medication, there must be a patient’s medication order from a doctor in the system. Once an order is selected, the dispensing cabinet opens, the medication is dispensed and an automatic record and bill is created.
The ATC system is modular and designed to be used in hospital pharmacies to dispense medication to patients. You state that the ATC system consists of a dispensing cabinet with multiple canister type compartments. Each compartment stores solid medication and packaging material. The system allows the pharmacist to dispense medication orders in strips of individual packets. The system records the transaction and debits the patient’s account. Once the medication has been dispensed, the coded strips are distributed to the various floors and medical units throughout the hospital.
The HTSUS provisions under consideration are as follows:
8476 Automatic goods-vending machines (for example, postage stamp, cigarette, food or beverage machines), including money-changing machines; parts thereof:
Other machines:
8476.81.00 Incorporating heating or refrigerating devices
8476.89.00 Other
8476.90.00 Parts
* * * * * * *
8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof:
Other machines and mechanical appliances:
8479.89 Other:
Other:
8479.89.97 Other
8479.90 Parts:
8479.90.95 Other
ISSUE:
Whether the Sure-Med and the ATC systems are classifiable as other automatic goods-vending machines under subheading 8476.89.00, HTSUS.
LAW AND ANALYSIS:
Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). 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 provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
The Harmonized Commodity Description And Coding System Explanatory Notes (EN’s) constitute the official interpretation of the Harmonized System. While not legally binding on the contracting parties, and therefore not dispositive, the EN’s provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the System. Customs believes the EN’s should always be consulted. See T.D. 89 80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
You contend that the Sure-Med and the ATC systems should be classified under subheading 8476.89.00, HTSUS, because heading 8476, HTSUS, is broad enough to include these medication dispensing machines. You argue that since the Sure-Med and the ATC machines are activated by magnetic cards or computer passwords, thereby creating a debit record on a patient’s account, it is classifiable as other automatic goods-vending machines.
The Section and Chapter Notes do not provide a clear definition of the term “vending machines.” A tariff term that is not defined in the text of the HTSUS and the ENs is construed in accordance with its common and commercial meaning. Nippon Kogaku (USA)Inc. v. United States, 69 CCPA 89, 673 F.2d 380 (1982). Common and commercial meaning may be determined by consulting dictionaries, lexicons, scientific authorities and other reliable sources. C.J. Tower & Sons v. United States, 69 CCPA 128, 673 F.2d 1268 (1982).
EN 84.76, at page 1419, provides that
[heading 8476] covers the various kinds of machines which supply some kind of merchandise when one or more coins, tokens or a magnetic card are put in a slot (other than those machines covered more specifically by other headings of the Nomenclature or excluded from the Chapter by a Chapter or Section Note).
The heading covers not only machines in which the distribution is automatic, but also those consisting of a number of compartments from which the merchandise can be withdrawn after the coin has been inserted, the machine incorporating a device for releasing the lock of the appropriate compartment (e.g., by pressing on a corresponding button).
Simple cupboards or containers with a coin operated lock, such as are used in stations for the deposit of baggage or in theaters for supplying opera glasses are excluded from this heading, but fall, for example, in Section XV or Chapter 94.
The heading includes machines equipped with heating or refrigerating devices, or with devices for preparing the product sold (e.g., fruit juice pressers, coffee and milk mixers, ice cream mixers), provided the principal function and purposes of the machines is the automatic sale of the product.
The heading includes coin operated machines for selling postage stamps, railway tickets, chocolate, sweets, ice cream, cigarettes, cigars, beverages (such as beer, wine, liqueurs, coffee or fruit juices), toilet products (including scent spraying machines), stockings, photographic films, newspapers, etc.; also machines on which name plates can be stamped out on a strip of metal.
The heading also covers money changing machines.
The term “vend” is defined in Webster’s II New Riverside University Dictionary 1280 (1988) as “--vt. 1. To sell. 2. To offer (e.g. an idea) for public consideration. --vi 1.a To sell goods. b. To sell by means of a vending machine.” The term “vending machine” is defined as “[a] coin-operated machine that dispenses merchandise.”
In this instance the Sure-Med and the ATC systems are not vending machines as that term is defined by the above sources. The systems do not perform the automatic sale of prescription drugs. The drugs are dispensed to a third party who is not purchasing the merchandise and is not its ultimate consumer. Furthermore, the units are not placed in the lobby or other high traffic area of a medical institution. They are instead located in restricted areas with limited access such as a nurse’s station or hospital pharmacy. The systems do not use coins or a magnetic card to effect an immediate sale as a vending machine of heading 8476, HTSUS would. Instead, it is clear that the “principal function and purpose” (EN 84.76 above) is to dispense medication. In this regard, we note that the product literature emphasizes this function of the machine (e.g. “Every dose is released individually, recorded automatically, and requires no counting when dispensed or at end of shift. The Unit-Dose can accommodate large quantities of oral solids, ampules, vials, syringes and ATC packaged medications.”) with virtually no reference to any “sale” function. Therefore, we find that the merchandise is not classifiable under subheading 8476. 81.00 or 8476.89.00, HTSUS.
You cite Revenue Canada rulings 130107, dated March 22, 1996, and 98002, dated November 29, 1993, which address the classification of the Sure-Med and conclude that the system is described by heading 8476. Based on these rulings you suggest that the “pivotal characteristic of a ‘vending machine’ is its capability to dispense a product and to either receive immediate payment or generate a billing or debit.” You also cite NY 830252, dated June 9, 1988, which classified an in-room hotel snack and drink machine, made of compartments that stored up to eight snacks or beverages. The machine was connected via the hotel’s television co-axial cable to a central computer. When a hotel guest removed a drink or snack, the computer system created an accounting record and debited the guest’s bill. Customs classified the machine under subheading 8476.90.00, HTSUS.
We note that Customs is not bound to abide by another country’s rulings. At best, the foreign ruling is merely instructive of how others may classify like goods. See T.D. 89 80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). In this instance, we cannot follow Canada’s rulings because the Explanatory Notes and lexicographic sources reflect a different meaning of “vending machine.” Similarly, we find that the subject merchandise is not analogous to the hotel snack machine of HQ 830252.
EN 84.79, at page 1422, states in part, that
This heading is restricted to machinery having individual functions, which:
(a) Is not excluded from this Chapter by the operation of any Section or Chapter Note.
and (b) Is not covered more specifically by a heading in any other Chapter of the Nomenclature.
and (c) Cannot be classified in any other particular heading of this Chapter since:
(i) No other heading covers it by reference to its method of functioning, description or type.
and (ii) No other heading covers it by reference to its use or to the industry in which it is employed.
or (iii) It could fall equally well into two (or more) other such headings (general purpose machines).
The EN further states, at page 1427, that
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), the heading also covers parts of the machinery of this heading, including moulds other than those covered elsewhere (in particular, heading 84.80).
The Sure-Med and ATC systems are provided for by heading 8479, HTSUS. The systems are not excluded from this Chapter by any Section or Chapter Note, and they are not covered more specifically by a heading of any other Chapter of the HTSUS. Also, they cannot be classified in any other heading of this Chapter because no other heading covers them by reference to their method of functioning, description, type, its use or to the industry in which they are employed. Therefore the Sure-Med and the ATC systems are classifiable under subheading 8479.89.97, HTSUS. Parts which are solely or principally used in these systems, and which are not excluded by note 1 to Section XVI or note 1 to Chapter 84, nor provided for as goods of other headings of Chapters 84 and 85 per note 2(a) to Section XVI, are classifiable under subheading 8479.90.95, HTSUS, which provides for parts of the goods of subheading 8479.89.97, HTSUS.
HOLDING:
The Sure-Med Automated Distribution System and the ATC System are classified under subheading 8479.89.97, HTSUS, as “Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and mechanical appliances: Other: Other: Other.” Parts for the systems are classifiable under subheading 8479.90.95, HTSUS, as “Parts: Other.”
Sincerely,
John Durant, Director
Commercial Rulings Division