OT:RR:CTF:CPMMA H308264 AJK
TARIFF NO: 9031.49.9000
Mr. Brian S. Goldstein
Duane Morris LLP
1540 Broadway
New York, NY 10036-4086
RE: Request for Reconsideration of NY N306741; Classification of Universal Bill Acceptor
Dear Mr. Goldstein:
This letter is in response to your reconsideration request, dated January 9, 2020, on behalf of your client, JCM American Corporation (JCM), in which you requested a reconsideration of New York Ruling Letter (NY) N306741, dated November 13, 2019, concerning the classification of the universal bill acceptors (UBA) under the Harmonized Tariff Schedule of the United States (HTSUS). U.S. Customs and Border Protection (CBP) has reviewed NY N306741 and found it to be correct with respect to the classification of the UBA.
FACTS:
The subject merchandise was described in NY N306741 as follows:
The products under consideration are referred to as Universal Bill Acceptors (UBA), model numbers UBA-10, UBA-14 and UBA-24. You state that the UBAs are able to detect multiple currencies simultaneously and distinguish counterfeit bills. The UBAs are used in industries such as banking, financial, gaming, kiosk, retail, transportation, vending and specialty industries. Each UBA model is composed of three subparts, which include a transport unit, frame and cash box. The UBA-14 also includes Universal Serial Bus (USB) communication capabilities. The UBA-24 adds the feature of upside-down mounting capability. Finally, each model contains magnetic and optical sensing as well as mechanical anti-stringing technology.
ISSUE:
Whether the UBA is classified in heading 9031, HTSUS, as a banknote measuring machine, or heading 9504, HTSUS, as a part of a gaming machine operated by banknotes.
LAW AND ANALYSIS:
Classification of goods under HTSUS is governed by the General Rules of Interpretation (GRI), and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation (ARI). GRI 1 provides that classification 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 2 through 6 may then be applied in order.
The ARI 1(a), which applies to principal use provisions, provides as follows:
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; ….
* * * * * *
The HTSUS provisions at issue are as follows:
9031 Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof:
Other optical instruments and appliances:
9031.49 Other:
9031.49.90 Other
9504 Video game consoles and machines, articles for arcade, table or parlor games, including pinball machines, bagatelle, billiards and special tables for casino games; automatic bowling alley equipment; parts and accessories thereof:
9504.30.00 Other games, operated by coins, banknotes, bank cards, tokens or by any other means of payment, other than automatic bowling alley equipment; parts and accessories thereof
Other:
Games:
9504.30.0060 Parts and accessories
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Note 1 to Chapter 90, HTSUS, provides, in pertinent part:
This chapter does not cover:
…
(k) Articles of chapter 95; ....
Note 3 to Chapter 95, HTSUS, provides, as follows:
Subject to note 1 above, parts and accessories which are suitable for use solely or principally with articles of this chapter are to be classified with those articles.
Subheading Note to Chapter 95, HTSUS, provides, in pertinent part:
[Subheading 9504.50] does not cover video game consoles or machines operated by coins, banknotes, bank cards, tokens or by any other means of payment (subheading 9504.30).
* * * * * *
The Harmonized Commodity Description and Coding System (HS) Explanatory Notes (ENs) constitute the official interpretation of the HS. While not legally binding or dispositive, the ENs provide a commentary on the scope of each heading of the HS at the international level, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The General EN to Chapter 95, HTSUS, provides, in pertinent part:
Each of the headings of this Chapter also covers identifiable parts and accessories of articles of this Chapter which are suitable for use solely or principally therewith, and provided they are not articles excluded by Note 1 to this Chapter.
EN 90.31, HTSUS, provides, in pertinent part:
[T]his heading covers measuring or checking instruments, appliances and machines, whether or not optical.
The Subheading EN for subheading 9031.49, HTSUS, provides as follows:
This subheading covers not only instruments and appliances which provide a direct aid or enhancement to human vision, but also other instruments and apparatus which function through the use of optical elements or processes.
EN 95.04, HTSUS, provides, in pertinent part:
This heading includes:
…
(6) Machines, operated by coins, banknotes, bank cards, tokens or by other means of payment, of the kind used in amusement arcades, cafés, funfairs, etc., for games
of skill or chance (e.g., machines for revolver practice, pintables of various types).…
The Subheading EN for subheading 9504.50, HTSUS, provides as follows:
This subheading does not cover video game consoles or machines operated by coins, banknotes, bank cards, tokens or by any other means of payment; these are to be classified in subheading 9504.30.
* * * * * *
It is undisputed that the UBA is not a stand-alone machine and that it is used as an internal component of other machines that need a separate part to accept, verify, and store banknotes. In NY N306741, CBP classified the merchandise in heading 9031, HTSUS, as a banknote measuring machine under GRI 1, because it found that the principal use of the merchandise is to validate and determine the authenticity of banknotes and store them. In your reconsideration request, however, you contend that CBP’s classification was incorrect and that the merchandise should be classified in heading 9504, HTSUS, as a part of gaming machines operated by banknotes. Upon our reconsideration, we affirm NY N306741 and hold that the UBA is properly classified in heading 9031, HTSUS.
The Legal Note 3 to Chapter 95 provides that “parts and accessories which are suitable for use solely or principally with articles of [chapter 95] are to be classified with those articles.” The EN to subheading 9504.50 provides that “video game consoles or machines operated by … banknotes” are classified in subheading 9504.30. See also Subheading Note to Chapter 95. Accordingly, subheading 9504.30.00, HTSUS, which provides for parts of video game machines operated by banknotes, is a principal use provision subject to ARI 1(a). To classify an article under a principal provision, ARI 1(a) requires that the classification is controlled by the principal use of “goods of that class or kind to which the imported goods belong”. In United States v. Carborundum Co., the U.S. Court of Customs and Patent Appeals held that to determine whether an article is included in a particular class or kind of merchandise, the court must consider a variety of factors, including: (1) the general physical characteristics of the merchandise; (2) the channels, class or kind of trade in which the merchandise moves (i.e., where the merchandise is sold); (3) the expectation of the ultimate purchasers; (4) the environment of the sale (i.e., accompanying accessories and marketing); (5) usage, if any, in the same manner as merchandise which defines the class; (6) the economic practicality of so using the import; and (7) the recognition in the trade of this use. 536 F.2d 373, 377 (C.C.P.A. 1976). While these factors were developed under the Tariff Schedule of the United States (predecessor to the HTSUS), the courts have also applied them under the HTSUS. See e.g., Minnetonka Brands v. United States, 24 C.I.T 645, 651-2 (2000); Aromont USA, Inc. v. United States, 671 F.3d 1310 (Fed. Cir. 2012); Essex Manufacturing, Inc. v. United States, 30 C.I.T. 1 (2006).
In the instant case, the UBA cannot be classified under heading 9504, HTSUS, because it is not a class or kind of machine that is principally used with casino gaming machines. In your reconsideration request, you assert that the ordinary use of the UBA in casino gaming machines “exceeds” those uses in other non-gaming industries, because JCM designed and manufactured the UBA to meet the unique needs of gaming industry and legal demands of gaming law. You further contend that non-gaming customers have no use for the UBA’s gaming-specific design because certain features, such as the security features according to state gaming regulations, would be unnecessary or economically unfeasible in other industries. Although we recognize the UBA’s gaming-specific design and features, the evidence of a single importer’s design or sale for the gaming industry does not demonstrate the actual principal use of the merchandise. See Carborundum Co., 536 F.2d at 377 (“Susceptibility, capability, adequacy, or adaptability of the import to the common use of the class is not controlling.”). You also contend that the physical characteristics of the UBA uniquely fits the demands of the machines used in the gaming industry. As stated in your reconsideration request, however, those physical characteristics do not prevent the UBA from being used in other machines and, in fact, it has other uses beyond casino gaming machines.
Moreover, the UBA is not an essential part of casino gaming machines as it does not enable the gaming function or facilitate the operation; instead, the UBA performs a distinct function—to authenticate, accept and store banknotes. It is not limited in its ability to be used with other kinds of machines, including, but not limited to, banking, dispensing and vending, as long as they require a part—such as the UBA—to authenticate and store banknotes. In HQ 958781, dated April 30, 1996, CBP held that color picture tubes used exclusively in the video game industry were not classifiable in heading 9504, HTSUS, because they lacked the features which dedicated the tubes for sole or principal use with video game monitors. Similar to the UBA that can be used with non-casino gaming machines, the tubes were capable of being used with non-video game appliances and thus, CBP held that the tubes did not meet the requirements of the Legal Note 3 to Chapter 95. Accordingly, the UBA, which is not exclusively used in the gaming industry, is not solely or principally used as a part of casino gaming machines. The primary function of the UBA is to optically validate the legitimacy of the banknotes being input. Hence, the UBA is not classifiable under heading 9504, HTSUS, as a part of gaming machines operated by banknotes.
Accordingly, as a machine that authenticates banknotes by using magnetic and optical sensors, the UBA is a distinct commercial entity that is covered in heading 9031, HTSUS, which provides for “measuring or checking instruments, appliances and machines, whether or not optical”. See EN 90.31. In HQ 964467, dated December 1, 2000, CBP classified bill acceptors under subheading 9031.49.9000, HTSUS. Similar to the UBA, the bill acceptors, which were placed inside of vending machines, scanned, accepted and rejected banknotes by using optical and magnetic sensors to verify them. In determining the correct heading, CBP found that the bill acceptors constitute optical checking instruments within the scope of heading 9031, HTSUS, due to their optical and magnetic sensors to verify currency and their primary function to validate banknotes. Similarly, in NY N009267, dated April 10, 2007, CBP classified optical bill acceptors, which were used as internal components of various machines to validate banknotes, under subheading 9031.49.9000, HTSUS. Although you assert that the UBA is specifically designed for and used in gaming industry, the UBA is substantially similar to the products described in HQ 964467 and NY N009267 as they all share the primary function of verifying the legitimacy of, accept or reject, and store banknotes—a function that is universal to any machine that takes bills. The UBA, therefore, is classified in heading 9031, HTSUS, as a banknote measuring machine.
In your reconsideration request, you assert that a similar issue was raised by JCM in a series of protests filed with the Port of Long Beach in September through October of 2007. You submitted CBP’s decision, dated October 5, 2007, in which CBP accepted JCM’s protest. You claim that CBP classified parts and accessories of bill acceptors and validators used in casino gaming machines under subheading 9504.30.0060, HTSUS; however, you did not provide any evidence that supports your claim. In addition, you contend that CBP confirmed its classification of spare parts for bill acceptors in heading 9504, HTSUS, when it cancelled the CF29 Notice of Action, dated November 30, 2009, in which CBP initially classified the merchandise in subheading 9031.49.9000, HTSUS, pursuant to HQ 964467 and NY N009267. The submitted notice of action, however, is the original notice and does not indicate any subsequent change in its initial classification. Nevertheless, prior entries of similar merchandise finally liquidated over ten years ago have no bearing on this determination. See 19 U.S.C § 1514(a)(2).
Moreover, you contend that the UBA should be classified in heading 9504, HTSUS, according to NY I86148, dated September 26, 2002, which classified a universal stacker under heading 9504, HTSUS. The universal stacker was also capable of use in other machines in addition to casino gaming machines. We intend to propose to revoke this ruling in accordance with 19 U.S.C. § 1625. You will be afforded the opportunity to comment on the proposed revocation published in an upcoming edition of the Customs Bulletin found at https://www.cbp.gov/trade/rulings/bulletin-decisions.
Pursuant to GRI 1, therefore, the UBA is classified in heading 9031, HTSUS, as a banknote measuring machine. This conclusion is consistent with prior CBP rulings classifying other banknote acceptors and similar articles under heading 9031, HTSUS.
HOLDING:
By application of GRI 1, the UBA is classified in heading 9031, HTSUS, specifically subheading 9031.49.9000, HTSUS, which provides for “Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof: Other optical instruments and appliances: Other: Other”. The 2021 column one, general rate of duty is free.
Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at www.usitc.gov.
EFFECT ON OTHER RULINGS:
NY N306741, dated November 13, 2019, is hereby affirmed.
Sincerely, for
Craig T. Clark, Director Commercial and Trade Facilitation Division