CLA-2 OT: RR: CTF: TCM: H271470 ERB/HvB
Ms. Sophia Chan
Compliance Analyst
Blue Coat Systems
420 North Mary Avenue
Sunnyvale, CA 94085
RE: Revocation of NY N213277, Revocation of NY N247242, Revocation of NY N247732; Tariff classification of Blue Coat Systems Security Analytics Appliances
Dear Ms. Chan:
U.S. Customs and Border Protection (CBP) issued Blue Coat Systems New York Ruling Letters (NY) N213277, dated May 4, 2012, NY N247242, dated November 13, 2013, and NY N247732, dated December 3, 2013. We have since reviewed these rulings and find them to be in error with respect to the classification of the various Blue Coat security system appliances.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed action was published in the Customs Bulletin, Vol. 50, No. 23, on June 8, 2016. No comments were received in response to the notice.
FACTS:
NY N213277, dated May 4, 2012 stated the following:
The merchandise under consideration is a blue coat full proxy edition of an Internet proxy appliance. It is referred to as ProxySG 900/9000, which is part of blue coat’s web security solutions that provides complete web security and WAN optimization.
The blue coat full proxy edition ProxySG 900/9000 delivers a scalable proxy platform architecture to secure web communications and accelerates the delivery of business applications. ProxySG 900/9000 enables flexible, granular, policy controls over content, user’s applications, web applications and protocols. It provides the ability to deliver web security and acceleration in one solution to a branch office. This enables branch users to have access directly to the Internet, with the same security coverage as those users in the main office.
You have suggested that the classification of the blue coat full proxy edition ProxySG 900/9000 should be Harmonized Tariff Schedule of the United States (HTSUS) subheading 8471.80.9000, which provides for “Automatic data processing machines and units thereof…Other units of automatic data processing machines: Other: Other.” However, the blue coat full proxy edition ProxySG 900/9000 is not an automatic data processing machine or a unit thereof. Rather, it provides architecture for secure web (Internet) communications, WAN (Wide Area Network) optimization, and accelerates the delivery of web-enabled business applications. It is not covered by heading 8471 when presented separately, even if it meets all of the conditions in Note 5 (C). Note 5 (D) (ii) to Chapter 84, HTSUS, excludes apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network). Apparatus that executes these functions are provided for within heading 8517. As such, subheading 8471.80.9000 is inapplicable.
The applicable subheading for the blue coat full proxy edition ProxySG 900/9000 will be 8517.62.0050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: Other." The rate of duty will be free.
NY N247242, dated November 13, 2013, and NY N247732, dated December 3, 2013, classified substantially similar goods in the same subheading as the goods of NY N213277.
ISSUE:
Whether merchandise which receives data, processes data, and transmits data over a wired or wireless network is classified in heading 8471 as automatic data processing machines, in heading 8517 as apparatus for communication in a wireless network, or whether it is classified in heading 8543 as other electrical apparatus.
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, the remaining GRIs may then be applied in their appropriate order.
The HTSUS headings under consideration are the following:
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
8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof:
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:
Note 3 to Section XVI which covers Chapter 85, provides, in part, that unless the context otherwise requires, 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 which performs the principal function.
Note 5 (A) to Chapter 84 states:
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.
Note 5 (D) to Chapter 84 states, in relevant part:
(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in Note 5(C) above:
(ii) Apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network);
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, the ENs provide a commentary on the scope of each heading of the HS and are thus useful in ascertaining the proper classification of merchandise. See T.D. 89-90, 54 Fed. Reg. 35127 (August 23, 1989).
The ENs to heading 8517, HTSUS, state, in relevant part:
This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electro-magnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, radio-telephony, radio-telegraphy, local and wide area networks.
The subject appliances are user specific data processing devices. The function of these network security devices is to receive, record, and process data in an effort to ensure a secure network environment. They run security programs against the incoming data to check for security issues, to ensure a secure network environment. If or once a threat is identified, it is flagged for the user or monitor. The appliances are not freely programmable. While they operate within a network, the network would transmit and receive data without these devices. These appliances scan and identify threats, pursuant to an algorithm. This is why such large amounts of data storage are needed and included with the product.
Note 5(A) to Chapter 84 defines “automatic data processing machines” as articles which satisfy four enumerated requirements. The merchandise described in NY N213277, NY N247242, and NY N247732 are not freely programmable, and therefore do not meet the terms of Note 5(A), and are excluded from classification in heading 8471, HTSUS. Furthermore, as the subject appliances communicate identified threats within a specified network (whether wired or wireless), they are also excluded from heading 8471, pursuant to Note 5(D) to Chapter 84.
Note 3 to Section XVI states that 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 which performs the principal function. As noted above, the subject appliances have multiple key functions. The first function is to process incoming transmissions to identify threats. The processing function is described by the heading text of 8543, HTSUS. The second function is to communicate those threats to the system or the user. This function is described as the transmission of data in a wired or wireless network, of goods of heading 8517, HTSUS
In HQ W967550, dated January 28, 2008, this office classified a similar product which had two functions, one each in heading 8517 and 8543, HTSUS. There we noted that Additional U.S. Rule of Interpretation 1(a) was relevant when determining the “principal use” of the class or kind of good to which an imported good belongs. In citing the “Carborundum Factors”, CBP found that the functions (so-called primary and secondary by the importer) were in fact equal. In applying the General ENs to Section XVI with respect to multi-function and composite machines: “Where it is not possible to determine the principal function, and where, as provided in Note 3 to the Section, the context does not otherwise require, it is necessary to apply GRI 3(c)”. GRI 3(c) provides that goods cannot be classified by reference to GRI 3(a) or (b) must be classified in the heading which occurs last in numerical order among those which equally merit consideration.
Here, the two functions work in tandem and are necessary for the security appliances to work. The appliances must identify incoming threats, and transmit and communicate those threats within the network to the end-user by reproducing the data. One without the others is useless. As such, no single principal function can be identified, and classification pursuant to GRI 3(c) is appropriate. Under GRI 3(c) the Blue Coat full proxy Proxy SG900/9000 appliance, SG-S500 Proxy SG appliance, and the Blue Coat SSL Visibility appliance are provided for in heading 8543, HTSUS, which is the last in the tariff of the headings under consideration.
HOLDING:
By application of GRI 1, the subject merchandise is classified in heading 8543, HTSUS. Specifically, it is provided for in subheading 8543.70.9960, HTSUSA (Annotated) 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: Other.” The 2016 column one, general rate of duty for merchandise of this subheading is 2.6% ad valorem.
EFFECT ON OTHER RULINGS:
NY N213277, dated May 4, 2012, is REVOKED.
NY N247242, dated November 13, 2013, is REVOKED.
NY N247732, dated December 3, 2013, is REVOKED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division