CLA-2:OT:RR:CTF:TCM H026665 EMS
Michael J. Skidmore
103 Greenleaf Street
Quincey, MA 02169
RE: AIDA (Advanced Image and Data Archiving) System Compact II, 20040601U
Dear Mr. Skidmore:
This letter is in response to your correspondence dated March 13, 2008, on behalf of Karl Storz Endoscopy America, Inc., requesting a prospective ruling on the classification of the AIDA (Advanced Image and Data Archiving) System Compact II under the Harmonized Tariff Schedule of the United States. Your submission was referred to this office for a response.
FACTS:
Karl Storz Endoscopy America, Inc. produces endoscopic equipment for human and veterinary medicine and for industrial applications. Included in its product line for human medicine is the AIDA (Advanced Image and Data Archiving) System Compact II, 20040601U. The AIDA system is described by the User Manual as “a secure, ergonomic, and fast PC-based archiving and documentation system for still images, video and audio sequences (for example, from an endoscopic video camera) and patient data.” The source of both the still images and the video sequences is a video signal generated by an endoscopic camera, a room camera, an Operating Room (OR) light camera, an ultrasound device, or other video recording device. The AIDA system captures streaming video and still shots simultaneously when operated via a remote camera, footswitch, and/or manual control panel.
The AIDA system is designed and intended for use in hospitals by physicians and medical assistants with specialized qualification and accreditation in its operation. The software creates a database that associates captured images, video, and audio sequences with relevant patient information. After recordation, the still images may be enhanced through editing by the user. The data captured and stored in the AIDA is for documentation purposes, but it is not for the diagnosis of patients.
The AIDA system consists of database-based application software and a hardware platform. The hardware platform includes the following: AIDA control, compact keyboard, mouse, headset and extension cable, connecting cable, S-Video (Y/C) cable, USB memory stick, and power cord. All of these items are imported together in the same packaging, and later sold to users in this condition. The AIDA control converts signals from a video source in the hospital (e.g., the endoscopic video camera) into digital files that can be saved on the AIDA’s database. The digital files may consist of still images in BMP or JPG formats and video, as well as any recorded audio sequences, in MPEG2 format. The data files are stored on the local hard drive of the AIDA control and later transferred for longterm retention to a flash drive, CD/DVD, a network drive (if configured), and any other automated hospital information and/or archival systems. Features of the AIDA control include a Pentium M 1.7GHz processor, 2GB RAM, 500 GB hard drive, network ports, USB ports, a monitor port (VGA), etc.
The AIDA system is embedded with Windows XP, and its software prevents the downloading of other software by users (except by the administrator). The very first page of the Instruction Manual contains an “Important Note” that “[a]ny modification of the software or hardware not authorized by KARL STORZ will result in a loss of medical approval and warranty.” This prohibition specifically includes “third party software of any type.” According to your submission, if the administrator were to install the Microsoft ® Word program on the AIDA control, it is not certain that the AIDA system would function properly thereafter. The software license also states that “use of the [AIDA system] Software in connection with other products bought by the Customer from KARL STORZ or from third parties is prohibited.” Warnings are made that any additional software added not in compliance with the AIDA could result in malfunctions and lost data.
ISSUE:
Whether the AIDA (Advanced Image and Data Archiving) System Compact II is properly classified under heading 8471, HTSUS, as an automatic data processing machine, or heading 8521, HTSUS, which provides for video recording or reproducing apparatus?
LAW AND ANALYSIS:
Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs 1 through 5.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding on the contracting parties, and therefore not dispositive, the ENs 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. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
The HTSUS headings under consideration are as follows:
8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto media in coded form and machines for processing such data, not elsewhere specified or included:
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8521 Video recording or reproducing apparatus, whether or not incorporating a video tuner:
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9018 Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scintigraphic apparatus, other electromedical apparatus and sight-testing instruments; parts and accessories thereof:
It is your position that the AIDA system is an automatic data processing ("ADP") machine, classified under heading 8471, HTSUS. However, if an ADP machine is described by heading 9018, HTSUS, then heading 8471 is precluded from consideration. Section XVI, Note 1(m), HTSUS, states that the Section, which includes Chapter 84, does not cover articles of Chapter 90. Heading 9018, HTSUS, covers, inter alia, “[i]instruments and appliances used in medical … sciences.” The AIDA system is exclusively for use in medical practices; however, CBP has previously explained that an apparatus that incorporates or operates in conjunction with an automatic data machine for processing and visualizing clinical data is classifiable in this heading only if it is “electro-diagnostic” in nature. See EN (V)(1)(x) to Heading 9018 and HQ H011145, dated August 16, 2007 (explaining that “diagnostic” entails the making of or aiding in a diagnosis). The AIDA system processes the medical images that it records for archiving purposes, but, as explained such archiving is documentary- it is not used in the diagnosis, prevention, or curing of diseases. Therefore, classification under heading 9018, HTSUS, is precluded.
The AIDA system must satisfy the terms of Note 5(A) to Chapter 84 to be classified as an ADP machine of heading 8471, HTSUS. Note 5(A) provides as follows:
For the purposes of heading 8471, the expression "automatic data processing machines" means machines capable of:
Storing the processing program or programs and at
least the data immediately necessary for the
execution of the program;
(ii) Being freely programmed in accordance with the
requirements of the user;
(iii) Performing arithmetical computations specified by
the user; and
Executing, without human intervention, a processing
program which requires them to modify their
execution, by logical decision during the processing
run.
The AIDA system’s control appears to satisfy factors (i), (iii), and (iv). Embedded with Windows XP as its operating system, the control is a PC-based platform with a Pentium M processor, 2GB RAM, 500GB hard drive, network ports, USB ports, etc. The CPU microprocessor is capable of performing arithmetical computations as specified by the user and is capable of executing, through the OS and without human intervention, programs which require them to modify their execution, by logical decision during the processing run.
However, the evidence provided for our review does not demonstrate that, in its imported condition, the AIDA control is freely programmable. “[A] freely programmable ADP machine is one that applications can be written for, does not impose artificial limitations upon such applications, and will accept new applications that allow the user to manipulate the data as deemed necessary by the user." HQ 964880 dated December 21, 2001. See Optrex Am. Inc. v. United States, 475 F. 3d 1367, 1370 (Fed. Cir. 2007) (agreeing with CBP’s interpretation of the “freely programmable” requirement). There is no affirmative representation that the hardware and software are installed into the AIDA system without any proprietary restrictions or blocks. In your submission, you could not state with certainty that the installation of a program like Microsoft ® Word would not adversely impair the functioning of the control. Additionally, the software installation manual and license prohibit the downloading of additional software, and also identify such action as an impediment to the operation of the device. Accordingly, the AIDA control does not meet the requirement in Note 5(A)(ii) because it is not freely programmable.
The AIDA control is a composite machine, i.e., it is “designed for the purpose of performing two or more complementary or alternative functions” per Note 3 to Section XVI of the HTSUS, which requires that it is to be classified as if “consisting only of that component which performs the principal function.” The AIDA control digitally records video from cameras in a medical facility and archives those images for later viewing and reproduction. While still images may also be captured from the video, it is the video recording that is of greater significance because it requires more memory and provides a more comprehensive record of a medical procedure. The recording of video is its principal function. The data processing and archiving functions are significant, but they are for the purpose of processing the recorded video. Other functions of the AIDA control (including the recordation of audio, the tracking of patient information, the reproduction of video and still images, and the annotating of still images captured from the video source) are clearly subsidiary.
The heading appropriate to the specific function of recording video is heading 8521, HTSUS, which provides for “[v]ideo recording or reproducing apparatus, whether or not incorporating a video tuner[.]” CBP has previously classified video image documentation systems in heading 8521, HTSUS. See, e.g., HQ 967054, dated June 1, 2004 (classifying PC-based High Definition Digital Recorders for which the primary function is to digitally record video from external sources); HQ 956012, dated March 30, 1994 (classifying a video recording system that stores images of ultra high speed events captured by an electrical still camera in its solid state memory). Accordingly, the AIDA control is classifiable in heading 8521, HTSUS.
Furthermore, the AIDA control’s function conforms to the ENs for 85.21(A). The ENs, provide, in pertinent part, as follows:
(A) Recording and Combined Recording and Reproducing Apparatus
These are apparatus which, when connected to a television camera or a television receiver, record on media electric impulses (analogue signals) or analogue signals converted into digital code (or a combination of these) which correspond to the images and sound captured by a television camera or received by a television receiver. Generally, the images and sound are recorded on the same media. The method of recording can be by magnetic or optical means and the recording media is usually tapes or disks.
In HQ 956012, CBP recognized that the use of RAM to store video images, instead of magnetic tape, was a technological advancement that was not contemplated by the Note, but certainly falls within the scope of heading 8521. The AIDA control also stores images on its local drive. See, e.g., Simmon Omega, Inc. v. United States, 83 Cust. Ct. 14, 26-7 (1979) (explaining that it is "inconceivable that Congress would have intended to foreclose from classification . . . future innovations")
The AIDA system consists not only of the control, but also a keyboard, a mouse, cables, manuals, etc. The AIDA system may be classified together as a set pursuant to GRI 3(b) if it consists of “goods put up in sets for retail sale.” EN X to GRI 3(b) sets forth the criteria for “goods put up in sets for retail sale,” which require that the goods:
(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).
The other items with which the AIDA control is packaged are prima facie classifiable in headings other than heading 8521, HTSUS, and each item contributes to the documentation of medical images. All of the items are packaged together with the control when imported, and they reach the purchaser of the AIDA system in the same packaging. Thus, the components are classifiable as a set for retail sale.
GRI 3(b) directs that the AIDA system is to be classified in the heading appropriate to the component that imparts its essential character. EN VIII to GRI 3(b) explains that “[t]he factor that determines the essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of the constituent material in relation to the use of the goods.” The PC-based AIDA control records the images, video, and audio generated by cameras in the hospital. All of the other components aid in its operation by providing the necessary software, electrical connections, etc. Accordingly, the AIDA system falls to be classified in the same provision as the AIDA control, as previously explained. This determination is limited to the condition of the AIDA system as imported with the specific items contained in its packaging. It does not take into account any other merchandise that may also be included in the same importation as the AIDA system.
HOLDING:
Under the authority of GRIs 1 and 3(b), the AIDA system is provided for in heading 8521, HTSUS. It is classifiable in subheading 8521.90.0000, HTSUS, which provides for “Video recording or reproducing apparatus, whether or not incorporating a video tuner: Other.” The column one, general rate of duty is free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
A copy of this ruling letter should be attached to entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch