OT:RR:CTF:CPMM H287055 RRB
Port Director
U.S. Customs and Border Protection
Port of Chicago
5600 Pearl Street
Rosemont, IL 60018
Attn: Osbaldo Cruz, Supervisory Entry Specialist
RE: Application for Further Review of Protest No. 3901-16-100021; Tariff classification of motor control boards and electronic speed controllers for remote-controlled vehicles
Dear Port Director:
The following is our decision regarding the Application for Further Review (“AFR”) of Protest Number 3901-16-100021, timely filed on January 6, 2016, on behalf of Horizon Hobby Distributors, Inc. (“Protestant”). The AFR concerns U.S. Customs and Border Protection’s (“CBP”) classification, under the Harmonized Tariff Schedule of the United States (“HTSUS”), of motor control boards (“MCBs”) and electronic speed controllers (“ESCs”) for radio remote-controlled vehicles (“RCVs”).
FACTS:
The protested merchandise consists of MCBs and ESCs, which are alleged to be solely or principally used with RCVs. ESCs are electronic circuit board assemblies, which are installed into and used in the control and operation of RCVs. Specifically, ESCs control the speed and direction of the electric motor that provides propulsive force to the RCV, while MCBs are used to control the operation of the RCV either automatically or through remote radio commands from the user.
Each of the ESCs at issue is compatible with connectors that are used with RCVs. ESCs are often used on motors, providing a low voltage source of energy for the motor. The internal electronics interpret a signal from the radio control receiver in order to measure and compute the power and direction of the controlled motor.
Generally, an MCB acts as the quadcopter flight controller by making decisions based on command signals the user sends from their transmitter. MCBs commonly perform a variety of functions for the quadcopter and may control some or all of the following aspects of flight, such as gyro stabilization, self-leveling, orientation and position, altitude hold, return home, waypoint navigation, and global positioning system (“GPS”) functionality.
The protested entries consist of five different models of ESCs and one model of an MCB. Specifically, the five models of ESCs at issue are set forth below:
The 80A Brushless Marine ESC: Dual Battery (DYNM3820) is compatible with pro boats. According to the Protestant’s online catalog, this item is “designed specifically [for] high performance marine applications.” It is “engineered to meet the demands of today’s high speed RC powerboats.”
The 4-in-1 ESC: 300 QX (BLH7709) is compatible with quadcopters featuring “sensor assisted flight envelope [SAFE] technology” that “offers smooth flight capability that battles windy conditions for you and multiple modes so you can fly with the level of protection and assistance that suits any given moment of the flight.”
The 10-Amp Brushless ESC: 350 QX (BLH7803) is compatible with various models of quadcopters featuring “sensor assisted flight envelope [SAFE] technology” and software that facilitates GPS and compass performance, self-leveling, altimeter technology, and a camera mount (camera sold separately).
The 10-Amp Pro Brushless ESC (EFLA1010) is compatible with various models of radio-control aircraft.
The 60-Amp Pro Switch-Mode BEC Brushless ESC (V2) (EFLA1060B) is also compatible with various models of radio-control aircraft.
The protested MCB is described as a “Main Control Board with Receiver: 350 QX/2 (BLH7901)”. It is compatible with various models of quadcopters featuring “sensor assisted flight envelope [SAFE] technology” and software that facilitates GPS and compass performance, self-leveling, altimeter technology, and a camera mount (camera sold separately).
The instruction manuals for the various quadcopters, radio-control aircraft, and pro boats that are compatible with the protested merchandise, as well as the instruction manuals for some of the ESCs and MCBs at issue, state the following:
This is a sophisticated hobby product and NOT a toy. It must be operated with caution and common sense and requires some basic mechanical ability. Failure to operate this Product in a safe and responsible manner could result in injury or damage to the product or other property. This product is not intended for use by children without direct adult supervision. Do not attempt disassembly, use with incompatible components or augment product in any way without the approval of Horizon Hobby, Inc. This manual contains instructions for safety, operation and maintenance. It is essential to read and follow all the instructions and warnings in the manual, prior to assembly, setup or use, in order to operate correctly and avoid damage or serious injury. . .
Age Recommendation: Not for children under 14 years. This is not a toy.
(Emphasis in original).
The protested merchandise was entered between September 4, 2014 and October 3, 2014, and the Port liquidated the merchandise as entered between July 15, 2015 and August 13, 2015. The MCBs were liquidated under subheading 8537.10, HTSUS, which provides for “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: For a voltage not exceeding 1,000 V,” at a duty rate of 2.7% ad valorem (2014). The ESCs were liquidated under subheading 8504.40, HTSUS, which provides for “Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Static converters,” at a duty rate of 1.5% ad valorem (2014). The Protestant filed this Protest and AFR, received on January 6, 2016, asserting that the subject merchandise is properly classified under subheading 9503.00.0090, HTSUSA (“Annotated”), which provides for “Tricycles, scooters, pedal cares and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced-scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof: Other.” The Protest and AFR were denied by the Port Director but the denial was subsequently set aside by our office on September 8, 2018, pursuant to 19 U.S.C § 1515(c).
ISSUE:
Whether the subject MCB and ESC units are classified under heading 8504, HTSUS, as “electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof”; under heading 8537, HTSUS, as “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”; or under heading 9503, HTSUS, as “Tricycles, scooters, pedal cares and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced-scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof.”
LAW AND ANALYSIS:
The protest was properly filed as a decision on classification under 19 U.S.C. § 1514(a)(2). The protest was timely filed within 180 days of liquidation of the entries. See 19 U.S.C. § 1514(c)(3).
Further Review of Protest Number 3901-16-100021 is properly accorded to the Protestant pursuant to 19 C.F.R. § 174.24(b) for the MCB units on the grounds that the decision is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts. In addition, Further Review of Protest Number 3901-16-100021 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(c) for the ESC units on the grounds that the decision involves matters previously ruled upon by the Commissioner of Customs or his designee or by the Customs courts but facts are alleged or legal arguments presented which were not considered at the time of the original ruling.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). 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, the remaining GRIs may then be applied.
The 2014 HTSUS provisions under consideration are as follows:
8504 Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof.
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.
9503 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls, other toys; reduced-scale (“scale”) models and similar recreational models, working or not; puzzles of all kinds; parts and accessories thereof.
Note 1(p) to Section XVI (chapters 84-85), states that Section XVI does not cover “Articles of chapter 95”.
Note 3 to chapter 95 states, in pertinent part, the following: “parts and accessories which are suitable for use solely or principally with articles of [chapter 95] are to be classified with those articles.”
Additional U.S. Rule of Interpretation 1 states, in pertinent part, the following:
In the absence of special language or context which otherwise requires—
* * *
(c) a provision for parts of an article covers products solely or principally used as a part of such articles but a provision for "parts" or "parts and accessories" shall not prevail over a specific provision for such part or accessory….
The Explanatory Notes (“EN”) to the Harmonized Commodity Description and Coding System represent the official interpretation of the tariff at the international level. While neither legally binding not 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 at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The EN to 85.04 provides, in pertinent part:
(II) ELECTRICAL STATIC CONVERTERS
The apparatus of this group are used to convert electrical energy in order to adapt it for further use. They incorporate converting elements (e.g., valves) of different types. They may also incorporate various auxiliary devices (e.g., transformers, induction coils, resistors, command regulators, etc.). Their operation is based on the principle that the converting elements act alternately as conductors and non conductors.
The fact that these apparatus often incorporate auxiliary circuits to regulate the voltage of the emerging current does not affect their classification in this group, nor does the fact that they are sometimes referred to as voltage or current regulators.
This group includes:
(A) Rectifiers by which alternating current (single or polyphase) is converted to direct current, generally accompanied by a voltage change.
(B) Inverters by which direct current is converted to alternating current.
(C) Alternating current converters and cycle converters by which alternating current (single or polyphase) is converted to a different frequency or voltage.
(D) Direct current converters by which direct current is converted to a different voltage.
…
Electrical static converters may be used for different purposes, e.g.:
(1) Converters to supply electricity to drive stationary machines or electric traction vehicles (e.g., locomotives).
(2) Supply converters, such as accumulator chargers (which consist essentially of rectifiers with associated transformer and current control apparatus), converters for galvanising and electrolysis, emergency power packs, converters for installations which supply high tension direct current, converters for heating purposes and for the current supply to electro magnets.
The EN to 85.37 states, in pertinent part:
These consist of an assembly of apparatus of the kind referred to in the two preceding headings (e.g., switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. They usually also incorporate meters, and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit diagrams.
The goods of this heading vary from small switchboards with only a few switches, fuses, etc. (e.g., for lighting installations) to complex control panels for machine tools, rolling mills, power stations, radio stations, etc., including assemblies of several of the articles cited in the text of this heading.
…
The heading also covers:
…
(3) “Programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines.
EN 95.03(D) states, in pertinent part:
(D) Other toys.
This group covers toys intended essentially for the amusement of persons (children or
adults)...These include:
…
(iv) Toy vehicles (other than those of group A), trains (whether or not electric), aircraft, boats, etc., and their accessories (e.g., railway tracks, signals)….
The Protestant asserts that because the ESCs and MCBs are solely or principally used with RCVs and marketed as such, they are classified in heading 9503 under note 3 to chapter 95.
As the ESCs are specifically designed to control the speed and direction of the electric motor of the RCV in which they are installed, they are classified under GRI 1 as “[s]tatic converters and specifically as speed drive controllers for electric motors” in subheading 8504.40.40, HTSUS. We have classified similar ESCs that were installed into an electric motor of a radio-controlled vehicle in subheading 8504.40.40, HTSUS. See NY R02242, dated July 29, 2005 (classifying an ESC designed for controlling the speed of a direct current electric motor, which is installed in radio-controlled model boats, in subheading 8504.40.40, HTSUS); NY N261410, dated February 23, 2015 (classifying an ESC designed for controlling the speed, braking, and direction of a brushless direct current electric motor that is installed in radio-controlled model helicopters and fixed wing aircraft in subheading 8504.40.40, HTSUS).
The instant MCBs act as the quadcopter flight controller, along with other functions depending on the model. While the MCBs perform a variety of functions such as gyro stabilization, its principal function is to control the speed and direction of the RCV through the ESC component. Although liquidated in heading 8537, HTSUS, in accordance with HQ 963750 and HQ 965360, the instant ESCs are distinguishable. There, the parts were wired handheld controllers that were required to be plugged into a central control hub, and incorporated single frequency radio transmitters, while the instant MCBs are the electronic hubs for the RCVs and do not contain radio transmitters. Thus, HQ 963750 and HQ 965360 are not on point in regards to classification of the MCBs. Rather, the MCBs are also classified in heading 8504, HTSUS.
Moreover, the quadcopters and boats to which the ESC and MCBs are installed after importation are not toys. Although the term “toy” is not defined in the HTSUS, in Minnetonka Brands v. United States, 110 F. Supp. 2d 1020, 1026 (CIT 2000), the Court of International Trade (“CIT”) held that an object is a toy only if it is designed and used for amusement, diversion or play, rather than practicality. In Ideal Toy Corp. v. United States, 78 Cust. Ct. 28 (1977), the U.S. Customs Court (predecessor to the CIT) similarly held that when amusement and utility become locked in controversy, the question becomes one of determining whether the amusement is incidental to the utilitarian purpose, or whether the utility is incidental to the amusement provided.
In Minnetonka Brands, the CIT concluded that heading 9503, HTSUS, is a "principal use" provision within the meaning of Additional U.S. Rule of Interpretation 1(a), HTSUS. Minnetonka Brands, 110 F. Supp. at 1027. Therefore, classification under this heading is controlled by the principal use of goods of that class or kind to which the imported goods belong in the United States at or immediately prior to the date of importation. In determining whether the principal use of a product is for amusement, and thereby classified as a toy, CBP considers a variety of factors, including: (1) the general physical characteristics of the merchandise; (2) the expectation of the ultimate purchasers; (3) the channels, class or kind of trade in which the merchandise moves; (4) the environment of the sale (i.e., accompanying accessories and the manner in which the merchandise is advertised and displayed); (5) usage, if any, in the same manner as merchandise which defines the class. United States v. Carborundum Co., 63 C.C.P.A 98, 102, 536 F.2d 373, 377 (1976).
The ESCs and MCBs at issue are separately imported parts that are installed into and used in the control and operation of various RCVs such as sophisticated pro boats, quadcopters, and radio control aircraft. The types of pro boats, quadcopters and radio control aircraft into which the ESCs and MCBs are installed include more advanced features than those typically found on toy drones, including “sensor assisted flight envelope [SAFE] technology” and autonomous flight via software that facilitates GPS and compass performance, self-leveling, altimeter technology, programmable motor braking and throttle range, waypoint navigation, 3D Agility Mode designed for experienced pilots, and a camera mount for positioning a separately-sold camera. Based on its more sophisticated features, the ultimate purchaser expects a more advanced drone rather than a toy. This is further highlighted by the fact that the instruction manuals for the various ESCs and MCBs, and for the RCVs with which they are used, all include explicit language stating that these items are not toys (stated twice on the same page, including one reference in bold type font) and are sophisticated hobby products that must be operated with caution and common sense. The protested merchandise and the RCVs with which they are used are generally sold by online retailers such as Horizon Hobby, LLC, which specializes in radio control products and accessories. These hobbyist RCVs and associated parts, such as ESCs and MCBs, are the only types of products sold on its website. These items can also be purchased through online retailers such as Amazon and eBay. Unlike more inexpensive remote-control airplanes designed as toys, the sophisticated RCVs with which the subject merchandise are used range in price between $159.99 and $479.99. Based on the foregoing, we find that the RCVs are not described as toys of heading 9503, HTSUS, and hence the ESCs and MCBs cannot be classified as parts of toys.
HOLDING:
By application of GRIs 1 (Note 2(a) to Section XVI) and 6, the subject ESCs and MCBs are classified under heading 8504, HTSUS, specifically under subheading 8504.40.40, HTSUS (2014), which provides for “[e]lectrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: [s]tatic converters: [s]peed drive controllers for electric motors.” The column one, general rate of duty at the time of entry was 1.5% ad valorem.
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 at https://hts.usitc.gov/current.
You are instructed to DENY the protest, except to the extent reclassification of the merchandise as indicated above results in a net duty reduction and partial allowance.
You are instructed to notify the Protestant of this decision no later than sixty (60) days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (CROSS) at https://rulings.cbp.gov/, or other methods of public distribution.
Sincerely,
Yuliya A. Gulis, Director
Commercial and Trade Facilitation Division