CLA-2 OT:RR:CTF:TCM HQ H225011 TNA
Port Director, Service Port- Laredo
U.S. Customs and Border Protection
Lincoln/Juarez Bridge, Administrative Bldg. #2 Laredo, TX 78040
Attn: Teresa Escalon, Senior Import Specialist
RE: Internal Advice Request; classification of IDKM-1000 and IDKM-1010 Intelligent Super Tag detachers
Dear Port Director:
This is in response to your letter, dated June 4, 2012, forwarding with comments the Request for Internal Advice submitted by Sensormatic Electronic LLC (“Sensormatic” or “Requester”), on May 18, 2012, concerning the proper classification of two models of Intelligent Super Tag Detacher Models under the Harmonized Tariff Schedule of the United States (“HTSUS”). In coming to our decision, we have taken into account arguments presented in a meeting with members of my staff on January 31, 2013. We have also considered arguments presented in a supplemental submission dated March 21, 2013, in which counsel withdrew from consideration classification in heading 8531, HTSUS, as parts of signaling apparatus.
FACTS:
The subject merchandise consists of two models of tag detachers identified as IDKM-1000 and IDKM-1010, Intelligent Super® Tag detacher. According to its “Installation & Programming Guide,” the IDKM detachers enable users to remove standard and Intelligent Super Tag anti-theft tags from merchandise at the point of sale. The detachers include assembly and mounting plates, screens, cables, adapters and a user guide for their independent function as a tag detacher.
In addition to removing tags from purchased items, the subject merchandise contain radio frequency identification (“RFID”) antennas. If coupled with a separate RFID reader, the detacher will transmit the RFID information on the tag to the terminal at which the sale is made. The terminal can then cross-reference the information on the hard tag against information obtained by scanning the bar code on the price tag. In addition, the information submitted by the subject tag detacher can generate real-time reports to assist in inventory management.
Entry documents indicate that the tag detachers were the only merchandise being imported in the entries at issue. The Port takes the position that the subject tag detachers are classified in heading 8543, HTSUS, and specifically in subheading 8543.70.96, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: Other.”
ISSUE:
Whether the subject tag detachers are classified in heading 8471, HTSUS, as “automatic data processing machines and units thereof,” in heading 8473, HTSUS, as “parts and accessories of the machines of heading 8471,” or in heading 8543, HTSUS, as “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof”?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined 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, 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 HTSUS provisions under consideration are as follows:
8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included:
8473 Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472:
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:
Note 2 to Section XVI, HTSUS, of which Chapter 85, HTSUS, is a part, states the following:
Subject to note 1 to this section, note 1 to chapter 84 and to note 1 to chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules:
(a) Parts which are goods included in any of the headings of chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings;
(b) Other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517…
Note 3 to Section XVI, HTSUS, states, in pertinent part, the following:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed 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.
Note 4 to Section XVI, HTSUS, states, in pertinent part, the following:
Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.
Note 5 to chapter 84, HTSUS, states, in pertinent part, the following:
(C) Subject to paragraphs (D) and (E) below, a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions:
It is of a kind solely or principally used in an automatic data processing system;
It is connectable to the central processing unit either directly or through one or more other units; and
It is able to accept or deliver data in a form (codes or signals) which can be used by the system.
Separately presented units of an automatic data processing machine are to be classified in heading 8471…
(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.
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 nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127 (Aug. 23, 1989).
The EN to heading 8471, HTSUS, states, in pertinent part, the following:
(I) AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF
…
This heading also covers separately presented constituent units of automatic data processing systems described above.
However, the heading excludes machines, instruments or apparatus incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines, instruments or apparatus are classified in the headings appropriate to their respective functions or, failing that, in residual headings (See Part (E) of the General Explanatory Note to this Chapter).
The EN to heading 8473, HTSUS, states, in pertinent part, the following:
Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), this heading covers parts and accessories suitable for use solely or principally with the machines of headings 84.69 to 84.72.
The EN to heading 8479, HTSUS, states, in pertinent part, the following:
For this purpose the following are to be regarded as having “individual functions”:
Mechanical devices, with or without motors or other driving
force, whose function can be performed distinctly from and independently of any other machine or appliance…
Mechanical devices which cannot perform their function unless they are mounted on another machine or appliance, or are incorporated in a more complex entity, provided that this function:
is distinct from that which is performed by the machine or appliance whereon they are to be mounted, or by the entity wherein they are to be incorporated, and
does not play an integral and inseparable part in the operation of such machine, appliance or entity.
The EN to heading 8543, HTSUS, states, in pertinent part, the following:
This heading covers all electrical appliances and apparatus, not falling in any other heading of this Chapter, nor covered more specifically by a heading of any other Chapter of the Nomenclature, nor excluded by the operation of a Legal Note to Section XVI or to this Chapter. The principal electrical goods covered more specifically by other Chapters are electrical machinery of Chapter 84 and certain instruments and apparatus of Chapter 90.
The electrical appliances and apparatus of this heading must have individual functions. The introductory provisions of Explanatory Note to heading 84.79 concerning machines and mechanical appliances having individual functions apply, mutatis mutandis, to the appliances and apparatus of this heading.
Most of the appliances of this heading consist of an assembly of electrical goods or parts (valves, transformers, capacitors, chokes, resistors, etc.) operating wholly electrically. However, the heading also includes electrical goods incorporating mechanical features provided that such features are subsidiary to the electrical function of the machine or appliance.
In its March 21 supplemental submission, Sensormatic emphasizes the subject tag detachers’ ability to scan the RFID information contained on the tags and transmit this information to a separate RFID reader. As a result, Sensormatic argues for classification in heading 8473, HTSUS, as “parts” of RFID readers as that term is defined in Bauerhin Technologies Limited Partnership v. United States, 110 F.3d 774, 779 (Fed. Cir. 1997), United States v. Pompeo, 43 C.C.P.A. 9 (1955) and United States v. Willoughby Camera Stores, Inc., 21 C.C.P.A. 322, 324 (1933).
In response, we note that the courts have considered the nature of “parts” under the HTSUS, and two distinct though not inconsistent tests have resulted. See Bauerhin Technologies Limited Partnership, & John V. Carr & Son, Inc. v. United States, (“Bauerhin”) 110 F.3d 774. The first, articulated in United States v. Willoughby Camera Stores, (“Willoughby Camera”) 21 C.C.P.A. 322 (1933) requires a determination of whether the imported item is “an integral, constituent, or component part, without which the article to which it is to be joined, could not function as such article.” Bauerhin, 110 F.3d at 778 (quoting Willoughby Camera, 21 C.C.P.A. 322 at 324). The second, set forth in United States v. Pompeo, (“Pompeo”) 43 C.C.P.A. 9 (1955), states that “an imported item dedicated solely for use with another article is a ‘part’ of that article within the meaning of the HTSUS.” Id. at 779 (citing Pompeo, 43 C.C.P.A. 9 at 13). Under either line of cases, an imported item is not a part if it is “a separate and distinct commercial entity.” Id.
The subject tag detachers are separate and distinct commercial entities, as evidenced by the fact that they are imported on their own in the entries at issue. Furthermore, it would be well within reason for these tag detachers to be purchased and used solely for their tag detaching function; a merchant need not purchase these tag detachers for their inventory management function, as the tag detaching function that is entirely separate from the RFID function. Thus, the tag detachers cannot be considered “parts” under either test set forth by the Bauerhin, Willoughby and Pompeo courts. Furthermore, even if the subject merchandise met the definition of a “part,” classifying it in heading 8473, HTSUS, as a part of an RFID reader would not describe the merchandise’s tag detaching function. Lastly, even if this merchandise were a part, classification in heading 8473, HTSUS, would be contrary to Note 2(a) to Section XVI, HTSUS, which requires that parts which themselves are merchandise of other headings of Chapters 84 and 85, HTSUS, to be classified in their respective headings.
As an alternative, Sensormatic argues for classification in heading 8471, HTSUS, as a unit of an automatic data processing machine (“ADP”). In order for the subject tag detachers to be considered units of an ADP, they must be of a kind solely or principally used in an automatic data processing system. See Note 5(C) to Chapter 84, HTSUS; EN 84.71. Even if the terminals have ADP machines under Note 5(A) to Chapter 84, HTSUS, a determination we decline to make here, the detachers are not a “unit” thereof. In order to be classified as a “unit” of an ADP machine, the subject merchandise must meet all of the specified requirements of Note 5(C) to Chapter 84, HTSUS. See Note 5(C). The first requirement of Note 5(C) is that a “unit” must be “of a kind solely or principally used in an automatic data processing system.” Furthermore, Note 5(E) precludes merchandise from being classified as a unit of an ADP machine if they perform a specific function other than data processing, even the merchandise incorporates or works in conjunction with an automatic data processing machine. See Note 5(E) to Chapter 84, HTSUS. CBP has precluded a wide variety of merchandise from being classified as units of ADP machines when they fail to meet either or both of these requirements. See, e.g., HQ H082637, dated January 5, 2010 (precluding non-medical brain-computer interface devices that were not used with ADP machines and performed a function other than data processing from being classified as units of ADPs); HQ 966172, dated June 4, 2003 (precluding PC cameras from classification as units of ADP machines because they performed a function other than data processing).
In the present case, the subject tag detachers are not of a kind solely or principally used in an automatic data processing system. To the contrary, they are imported by themselves and can be used on their own to remove tags from merchandise. These machines can provide this tag removal function independent of their ability to transmit data regarding inventory, and thus do not need to be connected to an ADP system to perform this function. Thus, the subject merchandise does not meet the requirement of Note 5(C)(i). Furthermore, even if it met this requirement, it performs functions that are independent of data processing, and would therefore be precluded from classification as a unit of an ADP machine under Note 5(E) to Chapter 84, HTSUS.
As evidenced by the discussion above, the subject tag removers perform multiple functions- i.e., removing the hard tags on purchased items and transmitting the data on those tags if connected to a reader. As such, it meets the definition in Note 3 to Section XVI, HTSUS, of “other machines designed for the purpose of performing two or more complementary or alternative functions,” and will be classified according to its principal function. We note that the commercial invoice submitted along with Sensormatic’s Request for Internal Advice lists one item: “tag detachers.” Furthermore, consumers who legitimately purchase merchandise could not leave the store without setting off an alarm if the subject merchandise did not remove the tag. In addition, whereas the inventory management component of the tag detachers is certainly beneficial to a retailer, a customer is unlikely to purchase or wear clothing from which the tags cannot be removed. As a result, we find it more logical that a retailer would purchase the subject merchandise for its tag detaching function first and its inventory management second than the other way around. As such, we find that the subject merchandise’s principal function is the tag detacher.
In addition, it is a well-established principle that goods must be classified in their condition as imported. See Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed. Cir. 1994); see also HQ H197758, dated April 27, 2012; HQ H154040, dated June 9, 2011; HQ H135335, dated April 18, 2011. The commercial invoice submitted along with Sensormatic’s Request for Internal Advice lists only the IDKM-1010. These entry summaries bear a single line item that states, “tag detachers,” and indicate that 20 of these detachers were imported at once. The tag detachers are imported as a single machine performing a particular function- to detach tags.
The subject tag detachers are machines that function by way of an electric power source. They also have separate individual functions, as this term is defined by EN 84.79, because they mechanically remove the tag from the purchased merchandise. Because the tag detachers have their own source of electrical power, they can be operated separately from the rest of the security system. Furthermore, as evidenced by the discussion above, the subject tag detachers are not described by another heading in the nomenclature. As such, they are described by the terms of heading 8543, HTSUS, as “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter.”
While we acknowledge that RFID readers are classified in 8471, HTSUS, as per the rulings that counsel cites, we note that the fact that the subject tag detachers contain an RFID antenna is not, in itself, sufficient to preclude their classification in heading 8543, HTSUS. To the contrary, prior CBP rulings have classified merchandise with antennas and RFID tags in heading 8543, HTSUS. See, e.g., HQ H097659, dated August 31, 2010 (classifying antennae in heading 8543, HTSUS); HQ 966786, dated January 21, 2004 (classifying an electronic hang tag consisting of a radio frequency circuit sandwiched between printed paper or cardboard labels that interacted with a transmitter and receiver to trigger an alarm in cases where the tag has not been deactivated by a cashier in heading 8543, HTSUS); NY R00748, dated September 24, 2004 (classifying an RFID transponder circuit that interfaced with a separate antenna or coil, which emitted radio signals to activate the tag and read and write data to it in heading 8543, HTSUS); NY N131678, dated November 24, 2010 (classifying a locking RFID cart/cabinet that incorporated RFID technology, biometric access control electronics, an enrollment station, an RFID reader, a barcode scanner, RFID tags and utilized a web-based information engine in order to electronically secure, track and manage high cost clinical supplies in heading 8543, HTSUS).
Furthermore, HQ 966961, dated May 3, 2004, classified an RFID transponder circuit- i.e., an electronically programmed radio frequency tag. There, the transponder circuit interfaced with a separate antenna or coil that emitted radio signals to activate the tag and read and write data to it. The antenna served as the conduit between the tag and the transceiver, which controlled the system’s data acquisition and communications. In HQ 966961, CBP classified this transponder circuit in heading 8543, HTSUS. We find this ruling instructive in that it classifies merchandise that is quite similar to the RFID system of which Sensormatic claims its tag detachers are a component.
HOLDING:
By application of GRI 1, the subject tag removers are classified in heading 8543, HTSUS. They are specifically provided for in subheading 8543.70.96, HTSUS, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: Other.” The applicable duty rate is 2.6% ad valorem.
You are to mail this decision to the Internal Advice requester no later than 60 days from the date of the decision. At that time, the Office of International Trade, Regulations and Rulings, will make the decision available to CBP personnel and to the public on CBP’s website, located at www.cbp.gov by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division