CLA-2 OT:RR:CTF:EMAIN H300063 PF
Port Director U.S. Customs and Border Protection John F. Kennedy International Airport Building 77, 2nd Floor
Jamaica, NY 11430
Attn: Gregory Dailey, Import Specialist
Re: Protest and Application for Further Review No: 4701-2018-100232; Classification of a Bitmain Antminer S9 Bitcoin Miner
Dear Port Director:
The following is our decision as to Protest and Application for Further Review No. 4701-2018-100232, which was filed on June 20, 2018 on behalf of North Country Data Center Corporation (“Protestant”). The protest pertains to the classification of a Bitmain Antminer S9 Bitcoin Miner (“Antminer S9”) under the Harmonized Tariff Schedule of the United States (“HTSUS”).
The subject merchandise was entered by protestant on July 24, 2017 at the John F. Kennedy International Airport. On January 5, 2018, CBP liquidated the entry under subheading 8543.70.99, 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.”
On June 20, 2018, protestant filed a protest and AFR regarding the tariff classification of the subject merchandise and claiming that the correct classification of the subject merchandise should be in subheading 8471.50.01, HTSUS, which provides for “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: Processing units other than those of subheading 8471.41 or 8471.49, whether or not containing in the same housing one or two of the following types of unit: storage units, input units, output units.” In the alternative, protestant maintains that the subject merchandise should be classified in subheading 8471.80.90, HTSUS, which provides for 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: Other units of automatic data processing machines: Other: Other.”
Our decision takes into account the arguments presented during a February 27, 2019 meeting and supplemental submissions received on March 14, 2019 and April 26, 2019.
FACTS:
The subject Antminer S9 is a machine used in mining various types of cryptocurrency. Cryptocurrency is defined as a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Individuals who possess cryptocurrency, such as Bitcoin, and seek to conduct a financial transaction rely on the network of “miners” to validate their transactions through mining.
The act of “mining cryptocurrency” is the process of updating a ledger of cryptocurrency transactions known as the blockchain. The blockchain is a series of blocks and a block is a collection of cryptocurrency transactions. Mining is done by application specific integrated circuit (“ASIC”) miners, such as the subject Antminer S9, which compete against other cryptominers in an attempt to guess a specific number that is associated with a block containing transaction data. The first cryptominer to guess the correct number is rewarded by being able to authorize the transaction, update the blockchain, and receive a fraction of cryptocurrency.
The Antminer S9 consists of an aluminum enclosure, two cooling fans, a controller printed circuit board assembly (“PCBA”), three separate PCBAs that are commonly referred to as hashboards, and 189 ASIC chips. The Antminer S9 requires at least one separate external power supply unit (“PSU”) that is attached to the hashboards and controller board, but may use up to three PSUs, one for each hashboard, depending on the capabilities of the PSUs employed. Once power is supplied to the Antminer S9 and the unit is connected to a dynamic host configuration protocol (“DHCP”) network, the Antminer S9 will obtain an IP address automatically from a DHCP server. In order to verify the IP address, a user will download the Antminer S9’s software on an automatic data processing (“ADP”) machine, click on the IP Report button on the controller board, and view the IP address in a window on a computer screen. A user will subsequently open a browser, enter the IP address and a username and password, and configure the Antminer S9. Once configured, the Antminer S9 receives data from a mining pool and begins to randomly produce hash calculations until solved. The Antminer S9 is continuously communicating with the mining pool. Neither the power supply nor the ADP machine are imported with the Antminer S9.
The controller boards contain a single Ethernet RJ45 connection, a reset button, status LED indicator(s), and a memory card slot. The memory card is used to update the controller’s firmware or hardware recovery. Each hashboard is populated with numerous ASICs and heat sinks on both sides. The hashboards slide into the aluminum enclosure and are connected to the control board through a ribbon cable on the data connector. There is no “motherboard” or backplane slot that connects the hashboards to the controller, they merely rest vertically in a channel inside the enclosure.
The Antminer S9 has minimal onboard flash memory and otherwise does not include a storage medium. There is no method for connecting a storage unit like a solid state drive or hard disk drive. A user cannot install, modify or remove program applications on the Antminer S9. The Antminer S9 also does not have a graphics interface, USB or similar control interface, a Bluetooth interface, audio input/output or a power supply. The Antminer S9 does not allow for general purpose computing tasks nor is it capable of displaying graphics. The Antminer S9 is programmed through firmware updates held on the memory card and configured and initialized through a network/Ethernet connected ADP machine. Mining functions are measured in “hash” calculations and are depicted as MH, GH, or TH.
Pictures of the Antminer S9 are provided below:
ISSUE:
Whether the Antminer S9 is classified as a processing unit of heading 8471, HTSUS, as a unit of an ADP machine of heading 8471, HTSUS, or as an electrical machine and apparatus, having individual functions, not specified or included elsewhere in Chapter 85, of heading 8543, HTSUS.
LAW AND ANALYSIS:
Initially, we note that the matters protested are protestable under 19 U.S.C. §1514(a) (2) as decisions on classification. The protest was timely filed, within 180 days of liquidation of the first entry. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2) (B) (ii), (iii) (codified as amended at 19 U.S.C. § 1514(c) (3) (2006)). Further Review of Protests No. 3004-17-100339 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(b) because the decision against which the protest was filed 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 courts.
Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (“GRIs”) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes.
GRI 1 requires that classification be determined first 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 heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The 2018 HTSUS headings 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….
8471.50.01 Processing units other than those of subheading 8471.41 or 8471.49, whether or not containing in the same housing one or two of the following types of unit: storage units, input units, output units….
8471.80 Other units of automatic data processing machines:
Other:
8471.80.90 Other.
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof….
8543.70 Other machines and apparatus:
Other:
Other:
8543.70.99 Other.
Additional U.S. Rules of Interpretation 1 (AUSR1), HTSUS, provides, in part:
In the absence of special language or context which otherwise requires:
a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use[.]
ADP machines are defined in Legal Note 5(A) to Chapter 84, HTSUS, which
provide 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;
Being freely programmed in accordance with the requirements of the user;
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.
To be classified as an ADP unit under heading 8471, HTSUS, an article must meet the terms of Legal Note 5(C) to Chapter 84, HTSUS, which provides that:
Subject to paragraphs (D) and (E) below, a unit is to be regarded as being a part of an automatic data processing system if it meets all the following conditions:
(i) It is of a kind solely or principally used in
an automatic data processing system;
(ii) It is connectable to the central processing
unit [CPU] either directly or through one or more other
units; and
(iii) 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….
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The ENs to heading 8471 provide, in pertinent part:
AUTOMATIC DATA PROCESSING MACHINES
AND UNITS THEREOF
Data processing is the handling of information of all kinds, in pre-established logical sequences and for a specific purpose or purposes.
Automatic data processing machines are machines which, by logically interrelated operations performed in accordance with pre-established instructions (program), furnish data which can be used as such, or, in some cases, serve in turn as data for other data processing operations.
This heading covers data processing machines in which the logical sequences of the operations can be changed from one job to another, and in which the operation can be automatic, that is to say with no manual intervention for the duration of the task….
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).
AUTOMATIC DATA PROCESSING MACHINES
The automatic data processing machines of this heading must be capable of fulfilling simultaneously the conditions laid down in Note 5(A) to this Chapter. […]
Thus, machines which operate only on fixed programs, i.e., programs which cannot be modified by the user, are excluded even though the user may be able to choose from a number of such fixed programs.
These machines have storage capability and also stored programs which can be changed from job to job….
(B) SEPARATELY PRESENTED UNITS
….Constituent units are those defined in Part (A) above and in the following paragraphs, as being parts of a complete system.
An apparatus can only be classified in this heading as a unit of an automatic data processing system if it:
Performs a data processing function;
(b) Meets the following criteria set out in Note 5 (C) to this Chapter:
(i) It is of a kind solely or principally used in an automatic data processing system;
(ii) It is connectable to the central processing unit either directly or through one or more other units; and
(iii) It is able to accept or deliver data in a form (codes or signals) which can be used by the system.
(c) Is not excluded by the provisions of Notes 5 (D) and (E) to this Chapter….
The EN to heading 8543, HTSUS, provides in pertinent part:
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 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.
The EN to heading 8479, HTSUS, provides, in relevant part:
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.
The Antminer S9 is capable of “storing the processing program or programs and at least the data immediately necessary for the execution of the program;” “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.” See Note 5(A)(i), (iii) and (iv) to Chapter 84, HTSUS. At issue in this case is whether the device is “capable of … being freely programmed in accordance with the requirements of the user.” See Note 5(A)(ii) to Chapter 84, HTSUS.
In Optrex America Inc. v. United States, 427 F. Supp. 2d. 1177 (Ct. Int’l Trade 2006), aff’d, 475 F.3d 1367 (Fed. Cir. 2007) (“Optrex”), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) upheld CBP’s longstanding interpretation that a “freely programmable” ADP machine is one that: (i) applications can be written for, (ii) does not impose artificial limitations upon such applications, and (iii) will accept new applications that allow the user to manipulate the data as deemed necessary by the user. 475 F.3d at 1368. See also Headquarters Ruling Letter (“HQ”) 964880, dated December 21, 2001. The Optrex court noted that “[CBP’s] interpretation is supported by the World Customs Organization’s Explanatory Notes […] which provide that ‘machines which operate only on fixed programs, that is, programs which cannot be modified by the user, are excluded [from heading 8471] even though the user may be able to choose from a number of such fixed programs.’ Explanatory Note 84.71(I)(A).” Id. at 1370. The court added that “[a]pplication programs are not ‘fixed’ because they can be installed or deleted from a machine.” 427 F. Supp. 2d at 1197.
CBP has ruled that devices which enable the user to decide which applications to install or delete from the device are freely programmable. For example, in HQ 964880, supra, CBP examined the classification of the Palm VII and VIIx – personal digital assistants (“Palm PDAs”) with Internet connectivity. Both models used Palm’s 3.2.0 OS, a 16MHz microprocessor, and came with 2 MB of random access memory and 2 MB of read-only memory. They were imported with pre-installed applications (including a date book, an address book, a memo pad, and desk top e-mail connectivity software) and could accept additional applications that were available directly from Palm or from third-party vendors. In finding that the devices were freely programmable, CBP stressed the fact that they could be programmed in several ways: directly on the devices, with a host computer to generate a generic application, or with a host computer to generate a native application. CBP also noted that:
the Palm [OS] is an open operating system; programming tools are readily available to any user either directly from Palm or from other commercial sources;
programming tools are readily available to any user either directly from Palm or from other commercial sources; [and]
hundreds of software applications are currently available for the Palm OS through a variety of vendors who distribute them either as freeware, shareware, or commercial applications …
CBP classified the PDAs in subheading 8471.30.00, HTSUS, as portable ADP machines.
Conversely, in HQ H026665, dated July 9, 2008, CBP ruled that the AIDA System Compact II, a machine used in hospitals to archive images, video and audio files associated with patient information onto a database, was not freely programmable because users were not free to add or remove software from the device. There, CBP noted, first, that the importer could not provide “… an affirmative representation that the hardware and software are installed into the AIDA without any proprietary restrictions or blocks” and second, that “the software installation manual and license prohibited the downloading of additional software and also identified such action as an impediment to the operation of the device.”
Similarly, in HQ 964682, dated July 15, 2002, we determined that the Sony PlayStation2 (“PS2”), a video game console, was not freely programmable because:
[p]roprietary blocks in the PS2 prevent the console from running any commercially available Linux OS and only specially designed Sony disks can be read by the system. If a non-PS2 compatible disc is inserted in the console, the hardware layer (with the firmware) determines that the disc does not contain one of the accepted formats and thus does not acknowledge it as accepted media.
Significantly, we noted that to run additional Linux-based programs on the PS2, the user was required to install Sony’s version of the Linux OS, which was not included with the console. Moreover, in HQ 952862, dated November 1, 1994, CBP determined that Teklogix data collection devices were not freely programmable, in part, because they were not “general purpose” machines and were designed for certain specific applications and could not by themselves perform the typical applications of computers or personal computers. HQ 952862 discussed the concept of freely programmable by examining the definitions of computer and personal computer and stated as follows:
“In determining whether a particular machine is "freely programmable," it is helpful to examine the definitions of the terms "computer" and "personal computer." A computer, which is freely programmable, is a "[g]eneral-purpose machine that processes data according to a set of instructions that are stored internally either temporarily or permanently." A. Freedman, The Computer Glossary, Sixth Edition, pg. 95 (1993). A personal computer "is functionally similar to larger computers, but serves only one user. It is used at home and in the office for almost all applications traditionally performed on larger computers." Computer Glossary (1993), pg. 400. Personal Computers "are typically used for applications, such as word processing, spreadsheets, database management and various graphics-based programs, such as computer-aided design (CAD) and desktop publishing. They are also used to handle traditional business applications, such as invoicing, payroll and general ledger. At home, personal computers are primarily used for games, education and word processing." A. Freedman, The Computer Glossary, Fourth Edition, pg. 524 (1989). Because they can perform any of the above-listed applications, personal computers are considered to be "freely programmable."
Applying Optrex and CBP’s administrative precedent, we conclude that the Antminer S9 is not a freely programmable ADP machine. The Antminer S9 is comprised of 189 ASIC chips. The internal hardware programming of each individual ASIC chip is specifically written for a certain type of coin mining algorithm. The Antminer S9 is designed and developed hardware right down to the chip level. In this case, the Antminer S9 is specifically designed to perform a singular function, which is mining. Because the ASIC chip is solely designed for mining, a user cannot run an operating system or play a video game on an Antminer S9. Unlike the Palm PDAs in HQ 964880, the Antminer S9’s architecture is not based on an open system design.
In addition, a user cannot install, modify or remove program applications on the Antminer S9. For example, the Antminer S9 cannot receive third-party applications, such as a word processing program or a virus protection program. EN 84.71(I)(A) provides that machines which operate only on fixed programs that cannot be modified by the user are excluded from heading 8471, HTSUS, even when the user may be able to choose from a number of such fixed programs. In this case, the Antminer S9 operates on fixed programs and does not accept the installation or removal of applications at will.
The protestant alleges that the Antminer S9 runs on a Linux operating system. However, a user cannot load an operating system, such as the Linux, onto the Antminer S9. The Linux operating system can be installed onto a functioning ADP machine, such as a desktop or laptop, but not on the Antminer S9 itself. Therefore, the Antminer S9 does not have a functional operating system with which to perform additional tasks. The programming installed onto the Antminer S9 is a proprietary ASIC controller application, which is not an operating system. The controller is a supervisory program that instructs the ASICs and allows remote access to hash calculating functions built into the unit.
The protestant also contends that the Antminer S9 can run on a Braiins “operating system,” (“OS”). The Braiins, however, is not an OS, but a type of firmware. Firmware is strongly coupled with the hardware of a computer system and is very difficult to change. The Braiins is described as being “mostly on par with vendor firmware . . . [i]t monitors the hardware and working conditions, handles errors and provides various performance data.” Moreover, the Braiins is referred to as the “very first fully open-source, Linux based system for cryptocurrency embedded devices” and attempts to develop a firmware to allow users of the Antminer S9 to benefit from power savings and performance improvements. As a result, the Braiins is marketed to improve power saving and performance on miners, including the Antminer S9. The Braiins is not marketed nor does it purport to contain additional features or functions, such as the installation of third-party programs.
Moreover, while the protestant maintains that the Braiins can be installed directly onto the Antminer S9, a quick-start guide to Braiins highly recommends installing the firmware on the SD card of a mining machine versus installing on the mining machine itself. The Braiins website further explains that if a user encounters any issues, it can “simply boot the stock firmware from the internal memory. This is a safe way we suggest to start with.” Notably, in HQ 964682, we determined that a PS2 was not freely programmable where an installed version of an OS had to be booted through a DVD-ROM drive and these programs could only be read from an external disc drive on the Internet connected to the PS2.
Protestant further maintains that Braiins can run multiple applications on its OS, which in turns makes the Antminer S9 freely programmable and provided a list of “applications” that purportedly run on the Braiins. However, we could not find support for the protestant’s claim that the Braiins accepts the installation of additional software nor that the installation of additional software on the Braiins would not act as an impediment to the operation of the Antminer S9. Since the processors on the Antminer S9 are specialized toward mining cryptocurrency, the Antminer S9 would likely run any other program very poorly, if at all.
Indeed, the manufacturer of the Antminer S9, Bitmain, does not warrant preloaded firmware on its products nor does it warrant that the operation of upgraded firmware will be error free. Bitmain also does not warrant “unauthorized alternations done to the hardware and firmware by any third party.” As a result, if the Braiins caused an error on the Antminer S9, the manufacturer, Bitmain would likely void the Antminer S9’s warranty. Based on these facts, we do not find that the Antminer S9 is freely programmable.
The Antminer S9 is simply not a general purpose machine because it cannot perform general purpose computing tasks. The Antminer S9 does not have input ability for a keyboard or mouse nor does it have output ability for a printer. The Antminer S9 has no word processing functions, nor can it perform calendar, music, or game applications. The Antminer is not capable of displaying graphics. See HQ 952862 (noting that a lack of graphic display and pixel configuration was a factor in finding that the data collection devices were not ADP machines). Its functions as imported, are limited to performing hash calculations. These limitations preclude the use of the Antminer S9 for the typical applications associated with ADP machines, such as word processing, spreadsheets graphics-based programs, and business applications.
We also note that EN 84.71(I)(A) requires that ADP machines have “storage capability and also stored programs which can be changed from job to job.” The Antminer S9 has minimal onboard flash memory that is used merely to configure the machine for the type of cryptocurrency being mined, addresses of mining pools, and the cryptographic script that is fed to the individual hashboards. The Antminer S9 also does not have the capability of connecting to a storage unit such as a solid state drive or hard disk drive. As a result, the Antminer S9 does not have sufficient memory to store and execute standard applications, unlike the Palm PDAs in HQ 964880.
The protestant relies on New York Ruling (“NY”) N285104, dated April 24, 2017, where CBP classified a credit-card sized, single board, fully functional personal computer (“Raspberry Pi”) in heading 8471, HTSUS and found that the machine was freely programmable. The Raspberry Pi was capable of using multiple types of operating systems and had numerous applications that were available for download onto the device. The Raspberry Pi was noted to work as a miniature personal computer that could perform tasks solely based on the needs of the user. There were also no hardware or software blocks preventing an end user from downloading and executing installed programs or off-the shelf software applications or performing tasks traditionally achieved by a typical laptop or personal computer. Unlike the Raspberry Pi, the Antminer S9 is not an open source device. In addition, the Antminer S9 is restricted to one function, which is mining, and is not capable of using multiple types of operating systems nor can it receive or download installed programs or off-the shelf software applications. The Antminer S9 also does not perform tasks traditionally performed by a laptop or personal computer. Therefore, NY N285104 is not applicable.
For the foregoing reasons, we find that the Antminer S9 is not “freely programmable” as required by Note 5(A)(ii) to Chapter 84, HTSUS. Therefore, the Antminer S9 does not meet the requirements of Note 5(A) to Chapter 84, HTSUS, and it is not an ADP machine of heading 8471.50, HTSUS.
In the alternative, the protestant maintains that the Antminer S9 is a unit of an ADP machine, and is classified in subheading 8471.80.90, HTSUS. In order to be a unit of an ADP machine, we must consider the requirements for units of ADP machines that are set forth in Note 5(C) to Chapter 84. While the Antminer S9 indirectly connects to a CPU via a network, it is not of a kind that is solely or principally used in an ADP system. See Note 5(C)(i) to Chapter 84 and BenQ Am. Corp. v. United States, 646 F.3d 1371, 1379-81 (Fed. Cir. 2011).
For articles governed by principal use, Additional U.S. Rule of Interpretation 1(a), HTSUS, provides that, in the absence of special language or context which otherwise requires, such use “is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.” In other words, the article's principal use at the time of importation determines whether it is classifiable within a particular class or kind of merchandise. See BenQ, 646 F.3d at 1379-1380.
While Additional U.S. Rule of Interpretation 1(a), HTSUS, provides general criteria for discerning the principal use of an article, it does not provide specific criteria for individual tariff provisions. However, the courts have provided factors which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: general physical characteristics, the expectation of the ultimate purchaser, channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), use in the same manner as merchandise which defines the class, economic practicality of so using the import, and recognition in the trade of this use. See United States v. Carborundum Co., 63 C.C.P.A 98, 102, 536 F. 2d 373, 377 (1976), cert. denied, 429 U.S. 979. CBP has applied this principle in subsequent rulings. See, e.g., HQ 082780, dated December 18, 1989. This principle has been carried over to the HTSUS, as courts have determined that principal use under the HTSUS is defined as the use which “exceeds all other uses.” See Lenox Collections v. United States, 20 C.I.T. 194, 196 (1996).
There is no dispute that the Antminer S9 receives its configuration and initialization instructions from an ADP system via a network connection. However, once the Antminer S9 is configured, it receives data from a mining pool and begins to randomly produce hash calculations until solved. The Antminer S9 is continuously communicating with a mining pool after it is configured and initialized. The Antminer S9 performs the hash calculations autonomously and, as a result, the Antminer S9 is dedicated to a particular function that does not rise to the level of “solely or principally used in an [ADP] system.”
In addition, an installation guide for the Antminer S9 provides instructions on how to configure, monitor, and administer the machine using an ADP system, but does not indicate that an ADP system is needed to perform the principal function of hash calculations. A website that reviews the Antminer S9 also describes this machine as a “self-contained unit” and provides that:
The S9 is a self-contained unit, excluding the power supply. No connection is needed to another computer to interface with other Bitcoin nodes. Its onboard web management portal allows for a simplified setup and maintenance process.
While an ADP system is used to set-up and configure the Antminer S9, the Antminer’s controller board and individual hashboards perform the principal function of the machine, which is to perform hash calculations. Each ASIC, and collectively together as a hashboard assembly, performs the specific function of solving the mathematical problems using internal programming it receives from the controller PCBA. The result of these thousands of cryptographic hash calculations per second is the possibility for an associated block of data to be completed, thereby receiving compensation, which we identify as mining. This function is performed without the assistance of an ADP system, which only serves as an interface to the Antminer S9. Based on the Carborundum factors and the information above, we find that the principal use of the subject Antminer S9 is not as a unit of an ADP machine, and that Note 5(C)(i) to Chapter 84, HTSUS, is not satisfied.
Assuming arguendo that the subject merchandise satisfies the requirements of Note 5(C)(i) through 5(C)(iii), supra, we note that Note 5(C) is still subject to Note 5(E) to Chapter 84. In this respect, we find that the Antminer is excluded from heading 8471, HTSUS, by application of Note 5(E) to Chapter 84, HTSUS. Note 5(E) provides that:
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 function or, failing that, in residual headings.
The term “data processing” is not defined in the HTSUS. As such, it must be construed in accordance with its common meaning, which may be ascertained by reference to “dictionaries, scientific authorities, other reliable information sources,” “lexicographic and other materials” and to the pertinent ENs. C.J. Tower & Sons v. United States, 69 C.C.P.A. 128, 673 F.2d 1268, 1271 (1982); Simod America Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989); GRK Can., Ltd. v. United States, 761 F.3d 1354, 1357 (Fed. Cir. 2014). The technical reference “Data Processing and Information Technology,” and EN 84.71 denote that “data processing” involves the collection and manipulation of data for a specific purpose. In addition, Merriam-Webster’s Dictionary defines “data processing” as “the converting of raw data to machine-readable form and its subsequent processing (such as storing, updating, rearranging, or printing out) by a computer.” Moreover, the Encyclopedia Britannica states that “data processing” consists of:
The manipulation of data by a computer. It includes the conversion of raw data to machine-readable form, flow of data through the CPU and memory to output devices, and formatting or transformation of output. Any use of computers to perform defined operations on data can be included under data processing.
In the present case, the Antminer S9 does not collect, convert, manipulate, or store data, nor handle information in pre-established logical sequences. Instead, the Antminer S9 is designed, marketed, and sold for the specific purpose of generating hash numbers until the cryptographic number is solved. The function of generating numbers is a very specific function and is not a data processing function. As such, the Antminer S9 is excluded from subheading 8471.80, HTSUS, by application of 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 Note 5(C)(i) to Chapter 84, HTSUS, and are excluded by application of Note 5(E) to Chapter 84, HTSUS. 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).
The Protestant relies on HQ W968368, dated February 28, 2008 to support its contention that the Antminer S9 is not excluded by Note 5(E) to Chapter 84, HTSUS. In HQ W968368, CBP determined that control interface units that performed functions of audio and musical recording, editing, and real time-mixing and could not perform these functions without the assistance of an ADP machine were units of an ADP system. In addition, CBP noted that the control interface units were not performing a function other than data processing and therefore were not precluded from classification by Note 5(E) to Chapter 84, HTSUS. HQ W968368 is distinguishable because the devices at issue were clearly units of a kind solely or principally used with an ADP system. In the present case, the Antminer S9 functions autonomously and as stated previously, the function of hash calculating is not a recognized data processing function.
The Protestant also cites to a decision made by the Harmonized System Committee which issued a classification opinion on a cryptographic processor. See Classification Opinion 847180/1 (adopted 1998). The function of the cryptographic processor was described as providing the “necessary data security functions (e.g., authentication and encryption) which would otherwise have to be performed by software loaded onto the host [ADP] machine; this eliminates the need for storage of certain security data bases in the [ADP] machine(s)….” However, the function of the cryptographic processor is not the same of the subject Antminer S9 which is to solely perform hash calculations. Therefore, reliance on Classification Opinion 847180/1 is not applicable or persuasive.
Since the function of hash calculating is not a defined function within the tariff, and the subject Antminer S9 is electrical, it is provided for in heading 8543, HTSUS. Heading 8543, HTSUS, provides for“[e]lectrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter, parts thereof[.]” EN 85.43 also provides that the “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.” Furthermore and as stated above, the Antminer S9 performs the function of hash calculations independently and apart from other machines. Therefore, the Antminer S9 is classified in heading 8543, HTSUS.
Our decision is consistent with NY N297495, dated June 8, 2018. In NY N297495, CBP classified two cryptocurrency mining machines, including the subject Antminer S9, in heading 8543, HTSUS. CBP reasoned that the cryptocurrency machines were not ADP machines of heading 8471, HTSUS, because they were not freely programmable. In addition, CBP held that the cryptocurrency machines were also not units of an ADP machine, because an ADP machine was only used to configure the machines and once configured, the machines were nearly autonomous once their target currency was programmed onto the control board. Finally, CBP found that the process of mining cryptocurrency was not recognized as a data processing function and therefore, were excluded from heading 8471, HTSUS by application of Note 5(E) to Chapter 84.
HOLDING:
By application of GRI 1, the Antminer S9, is classified in heading 8543. By application of GRI 6, the Antminer S9 is classified in subheading 8543.70.99 of the 2018, 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 2018 general column one, rate of duty is 2.6% 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 on the internet at www.usitc.gov/tata/hts/.
You are instructed to DENY the Protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP website 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