CLA-2 RR:CR:GC 961139 DWS
Mr. George R. Tuttle
George R. Tuttle A.P.C.
Three Embarcadero Center, Suite 1160
San Francisco, CA 94111
RE: POS Terminals; Slip and Roll Journal Printers; PIN Pads;
Section XVI,
Notes 3 and 4; Functional Units; Composite Machines; General
Explanatory
Notes VI and VII to Section XVI; HQs 086121, 959575, 953271,
546273, and
955566; NYs 851829, 859016, 874189, and 855636
Dear Mr. Tuttle,
This is in response to your letter of November 10, 1997, to
the Customs National Commodity Specialist Division, New York, on
behalf of VeriFone, Inc., concerning the classification of point-of-sale (POS) terminals, slip and roll journal printers, and
personal identification number (PIN) pads, imported together in
the same shipment, under the Harmonized Tariff Schedule of the
United States (HTSUS). Your letter has been referred to this
office for a response.
FACTS:
The merchandise consists of POS terminals (Models Zon Jr. XL
and Tranz 330),
slip and roll journal printers (Models 600, 500, 250, and 150),
and PIN pads. Both the printers and PIN pads are devices
physically separate from the POS terminals; however, they are
designed for use with and capable of being attached to the Zon
Jr. XL and Tranz 330.
The Zon Jr. XL and Tranz 330 are used by businesses to
record sales transactions as they occur. The sales data is
entered manually through a keyboard or automatically by using an
incorporated card reader. Once the sales information is entered,
the terminals are able to record inventory information, the
amounts of each sale, and the total of all sales. The devices
are also able to perform automated printing of customer receipts
by the use of the subject slip or roll printers. The Zon Jr. XL
and Tranz 330 each have a sixteen-key keyboard for the manual
input of data. The terminals have sixteen-character vacuum
fluorescent alphanumeric displays with a decimal point and a
comma. Both terminals are equipped with a magnetic card reader,
a serial port for printer support and a Z- 80 central processing
unit with 32K EPROM. The Zon Jr. XL has 16K RAM and the Tranz
330 has 32K RAM. Both terminals are
battery backed. The Zon Jr. XL and Tranz 330 have a built- in
Bell auto-dial modem. The terminals are operable on eight
communications networks.
The model 150 printer is a 7-pin shuttle impact dot matrix
printer which performs as a slip printer up to 42 columns wide,
and is capable of printing a complete audit trail summarizing a
day's business transactions. The model 250 is a 7-pin dot matrix
printer which is capable of producing 2- and 3-part receipts and
a summary of the day's transactions. The model 500 is a 4-function printer which produces roll-slip and validation receipts
as well as summary journal receipts. The model 600 uses single-ply thermal paper and produces a hard copy sales receipt for the
customer.
The PIN pads are devices which are used for entering the PIN
associated with an individual's (i.e., Automated Teller Machine)
debit card.
ISSUE:
Whether equal numbers of the subject POS terminals, slip and
roll journal printers, and PIN pads, imported together in the
same shipment but separately palleted and invoiced on separated
commercial invoices, constitute functional units with a clearly
defined function covered by heading 8470, HTSUS.
LAW AND ANALYSIS:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification is determined according to the
terms of the headings and any relative section or chapter notes.
The HTSUS provisions under consideration are as follows:
8470 Calculating machines and pocket-size data recording,
reproducing and
displaying machines with calculating functions; accounting
machines,
postage-franking machines, ticket-issuing machines and
similar machines,
incorporating a calculating device; cash registers:
8470.50.00 Cash registers.
* * * * * * * * *
8472 Other office machines (for example, hectograph or stencil
duplicating
machines, addressing machines, automatic banknote
dispensers,
coin-sorting machines, coin-counting or wrapping machines,
pencil-
sharpening machines, perforating or stapling machines):
8472.90 Other:
8472.90.95 Other.
* * * * * * * * *
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:
Parts and accessories of the machines of heading 8470:
8473.29.00 Other.
* * * * * * * * *
In HQ 086121, dated March 30, 1990, we held the Zon Jr. XL
and Tranz 330 to be classifiable under subheading 8470.50.00,
HTSUS. In that ruling, we stated that:
[t]he language of [Harmonized Commodity Description and Coding System
Explanatory Note] 84.70(C), HCDCS, makes clear that the Zon Jr. XL and
the Tranz 330 point-of-sale terminals are "cash registers" within the
meaning of heading 8470. Both terminals provide a record of all sales
transactions after the sale information is entered. Therefore, the
appropriate classification for the terminals is subheading 8470.50.00,
[HTSUS].
In NY 851829, dated April 25, 1990, slip printers, for use
with POS terminals, were held to be classifiable under subheading
8472.90, HTSUS. Therefore, we find that the subject slip and
roll journals, also for use with POS terminals, are classifiable
under subheading 8472.90.95, HTSUS.
In NY 859016, dated January 7, 1991, Customs held PIN pads,
for use with transaction terminals of heading 8470, HTSUS, to be
classifiable under subheading 8473.29.00, HTSUS. Consequently,
it is our position that the subject PIN pads are also
classifiable under subheading 8473.29.00, HTSUS.
Before we discuss whether multiple units, imported together
in the same shipment, may constitute functional units, we must
first determine whether a Zon Jr. XL or Tranz 330, slip or roll
journal printer, and a PIN pad, imported together, constitute a
functional unit. Section XVI, note 4, HTSUS, states that:
[w]here 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.
In understanding the language of the HTSUS, the Harmonized
Commodity Description and Coding System Explanatory Notes may be
utilized. The Explanatory Notes, although not dispositive or
legally binding, 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, 35128 (August 23, 1989). In part, General Explanatory
Note VII (p. 1227) to section XVI, HTSUS, states that:
[f]or the purposes of this Note, the expression "intended to contribute
together to a clearly
defined function" covers only machines and combinations of machines
essential to the
performance of the function specific to the functional unit as a whole,
and thus excludes
machines or appliances fulfilling auxiliary functions and which do not
contribute to the
function of the whole.
It is our understanding that, to function effectively, the
Zon Jr. XL or Tranz 330, which are cashless transaction
terminals, require a printer for the printing of receipts, and a
PIN pad for customers to input their debit PIN code. Therefore,
we find that, in light of General Explanatory Note VII to section
XVI, HTSUS, the slip or roll journal printer and the PIN pad are
"essential" to the function of the Zon Jr. XL or Tranz 330.
Consequently, it is our position that the three items (POS
terminal, printer, and PIN pad), imported together, constitute a
functional unit in that they are intended to contribute together
to a clearly defined function of heading 8470, HTSUS, and are
together specifically classifiable under subheading 8470.50.00,
HTSUS. See
NY 859016 and NY 874189, dated May 14, 1992.
You cite NY 855636, dated August 24, 1990, and HQ 959575,
dated May 6, 1997, as precedent for the claim that the three
subject items (POS terminal, printer, and PIN pad) are also
composite machines as defined in section XVI, note 3, HTSUS.
Section XVI, note 3, HTSUS, states that:
[u]nless the context otherwise requires, composite machines consisting
of two or
more machines fitted together to form a whole and other machines adapted
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.
In NY 855636, Customs held the Zon Jr. XL and Tranz 330,
each imported with one of the printers subject to this ruling
(Models 600, 500, 250, and 150), to be composite machines
classifiable under subheading 8470.50.00. In HQ 959575, citing
NY 855636, we held the Tranz 330, imported with an Everest
Transaction System, to be a composite machine also classifiable
under subheading 8470.50.00, HTSUS.
While we agree with the holdings in NY 855636 and HQ 959575
that the goods are classifiable under subheading 8470.50.00,
HTSUS, we must clarify the reasoning in both rulings for
reaching such conclusions. To be considered a composite machine,
two or more machines must be fitted together to form a whole. In
part, General Explanatory Note VI (p. 1227) to section XVI states
that:
[f]or the purposes of the above provisions, machines of different kinds
are taken to be
fitted together to form a whole when incorporated one in the other or
mounted one on
the other, or mounted on a common base or frame or in a common housing.
It is our understanding that the goods in both rulings were
interconnected by cables. It is our position that such
connections do not meet the term "fitted together to form a
whole", and, therefore, the goods cannot be considered composite
machines as defined in section XVI, note 3, HTSUS.
However, using the same analysis as with the subject
merchandise, we find that the goods in the two rulings constitute
functional units as defined in section XVI, note 4, HTSUS. That
note allows for items to be interconnected by cable, and it is
our position that the goods in both rulings contribute together
to a clearly defined function covered by heading 8470, HTSUS,
specifically under subheading 8470.50.00, HTSUS. Therefore, NY
855636 and HQ 959575 should no longer be cited in a section XVI,
note 3, HTSUS, composite machine analysis.
We must now ascertain whether equal numbers of the subject
POS terminals, slip and roll journal printers, and PIN pads,
imported together in the same shipment but separately palleted
and invoiced on separated commercial invoices, constitute
functional units with a clearly defined function covered by
heading 8470, HTSUS.
In HQ 953271, dated March 12, 1993, we stated that:
[r]ecently, the U.S. Court of International Trade reiterated that "[i]t
is well established
that an imported article is to be classified according to its condition
as imported . . . ."
XTC Products, Inc. v. United States, 771 F.Supp. 401, 405 (1991). See
also, United States v. Citroen, 223 U.S. 407 (1911).
In HQ 546273, dated July 25, 1996, we stated that:
[i]n IA 63/83 (Headquarters Ruling Letter (HRL) 074909), dated November
5, 1984, we
addressed a similar issue under the Tariff Schedules of the United
States (TSUS). In this
decision, we noted Customs obligation to classify and assess duty on
merchandise in its
condition as imported--that is, merchandise which arrives in the customs
territory in the
same shipment. We held that merchandise laden aboard separate trucks
which arrived
within the customs territory of the U.S. on the same day would be
considered, for classification
and appraisement purposes, as having arrived at the same time, or as
comprising a single shipment. See also, Franklin Industries, Inc. v.
United States, 1 C.I.T. 349 (1981) (wherein
the U.S. Court of International Trade held that to enjoy classification
under a single tariff item number all components necessary to the
completion of a particular article must be imported
in the same shipment); United States v. Baldt Anchor, Chain & Forge
Division of Boston
Metals Co., 59 CCPA 122, C.A.D. 1051, 429 F.2d 1403 (1972). This
principle applies as well
for purposes of classifying merchandise under the HTSUS. See, HRL
085252 dated
September 29, 1989. Accordingly, the components for the Cutting Line
Cut-to-Length and Rewinding machine, which arrived on different vessels,
on different days and at different ports, cannot be considered as a
single shipment for classification purposes.
Based upon the legal analysis above, when equal numbers of
POS terminals, printers, and PIN pads are imported together in
the same shipment, regardless of whether they are separately
palleted or invoiced, in their condition as imported they
together constitute multiple functional units classifiable under
subheading 8470.50.00, HTSUS. Should there be extra printers or
PIN pads in the shipment, each of which not matching a POS
terminal, then they are to be separately classifiable in the
HTSUS provisions describing them (printers - 8472.90.95, HTSUS;
PIN pads - 8473.29.00, HTSUS).
It has been suggested that the goods should not constitute
multiple functional units even if imported in the same shipment,
because, after importation, some of the items will be broken out
and used as inventory. We disagree. Section XVI, note 4, HTSUS,
is not a legal note which requires actual use. It is enough
that, in their condition as imported, the goods are intended to
contribute together to a clearly defined function covered by
heading 8470, HTSUS. The fact that the printers and PIN pads are
solely or principally used with the POS terminals is evidence of
such an intention. See HQ 955566, dated April 20, 1994.
HOLDING:
Equal numbers of the subject POS terminals, slip and roll
journal printers, and PIN pads, imported together in the same
shipment but separately palleted and invoiced on separated
commercial invoices, constitute functional units with a clearly
defined function covered by heading 8470, HTSUS, specifically
under subheading 8470.50.00, HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division