OT: RR: CTF: EMAIN: H300195 PF
Christopher Romero
Signal Power and Light
17 Executive Part Drive, NE 405
Atlanta, GA 30329
Re: Request for Reconsideration of NY N297495; Classification of cryptocurrency mining machines
Dear Mr. Romero:
This is in response to your correspondence submitted on July 6, 2018 and October 26, 2018, in which you request reconsideration of New York Ruling Letter (“NY”) N297495. NY N297495, issued to you on June 8, 2018 by U.S. Customs and Border Protection (“CBP”), involves classification of certain cryptocurrency machines under the Harmonized Tariff Schedule of the United States (“HTSUS”). In NY N297495, we classified two cryptocurrency machines identified as the Antminer S9 and the DragonMint Miner (“Miners”). In preparing this ruling, we have considered additional information submitted by you on October 26, 2018, December 24, 2018, January 24, 2019 and March 11, 2019. We have determined that NY N297495 is correct, and, for the reasons set forth below, are affirming that ruling. NY N297495 provided the following description of the cryptocurrency machines:
The first item is referred to as the Antminer S9 which consists of an aluminum enclosure, two cooling fans, a control board printed circuit board assembly (PCBA), and three separate PCBAs that are commonly referred to as hashboards. The control board has an Ethernet port, an IP pushbutton, a reset pushbutton, two status indicators, and a slot for an SD memory card. Each hashboard is populated with numerous application specific integrated circuits (ASICs) and heat sinks on both sides.
In use, the Antminer S9 has a dedicated function of performing hash calculations for cryptocurrency transactions. Power supplies are attached to each hashboard and the Antminer S9 is connected to a network via the Ethernet port. Users would address the Antminer S9 with a separate automatic data processing (ADP) machine and configure the device to perform the mining calculations for their selected cryptocurrency. We would note that neither the power supplies nor the ADP machine are imported with the Antminer S9.
The second item under consideration is referred to as the DragonMint Miner which consists of an aluminum enclosure, a control board, and three PCBA hashboards. The control board has an Ethernet port, an IP pushbutton, a reset pushbutton, two status indicators, and a slot for an SD memory card. Each hashboard is populated with numerous ASICs and heat sinks on both sides. Like the Antminer S9, the DragonMint Miner is a machine dedicated to performing hash calculations for cryptocurrency transactions. Once users connect a separate power supply to the hashboards and an Ethernet connection to the controller, they would address the mining device with a separate ADP machine and configure the unit to perform the mining calculations. Neither the power supplies nor the ADP machine are imported with the DragonMint Miner.
In NY N297495, CBP classified the Miners in 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.” You maintain that the Miners are properly classified 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.” However, because the subject Miners are not “freely programmable,” they do not meet the requirements of Note 5(A)(ii) to Chapter 84, HTSUS, and therefore cannot be classified as an ADP machine of heading 8471, 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. 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.
Applying Optrex and CBP’s administrative precedent, we conclude that the Miners are not freely programmable ADP machines. The internal hardware programming of each individual ASIC chip is specifically written for a certain type of coin mining algorithm. The Miners are designed and developed hardware right down to the chip level. In this case, the Miners are 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 a Miner. Unlike the Palm PDAs in HQ 964880, the Miner’s architecture is not based on an open system design.
In the present case, a user cannot install, modify or remove program applications on the subject Miners. For example, the Miners cannot receive third-party applications, such as a word processing program or a virus protection program. The Miners operate on fixed programs and do not accept the installation or removal of applications at will. You state that the Miners are freely programmable because a user has the ability to telnet into the mining control board and program it to issue a command of “hello.” However, this function does not establish the Miners’ ability to be freely programmable within the meaning of heading 8471, HTSUS, or the Explanatory Notes.
In addition, you maintain that the Miners run on a Linux operating system. However, a user cannot load the Linux operating system onto the Miners. The Linux operating system can be installed onto a functioning ADP machine, such as a desktop or laptop, but not on the Miners themselves. Moreover, you state that users can upload a Braiins “operating system” onto the Miners, which provides complete control over the miners. 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. Moreover, a user guide to the Braiins recommends that a user install the firmware on an SD card instead of on the Miner itself. Even after installation of the Braiins operating system, the Miners do not have a functional operating system with which to perform additional tasks. The programming installed onto the Miners 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 Miners are not general purpose machines because they cannot perform general purpose computing tasks. The Miners do not have input ability for a keyboard or mouse nor do they have output ability for a printer. The Miners have no word processing functions, nor can they perform calendar, music, or game applications. The Miners are 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). Their functions as imported, are limited to performing hash calculations. These limitations preclude the use of the Miners for the typical applications associated with ADP machines, such as word processing, spreadsheets graphics-based programs, and business applications.
We also note that Explanatory Note 84.71(I)(A) requires that ADP machines have “storage capability and also stored programs which can be changed from job to job.” The Miners have minimal onboard flash memory that is used merely to configure the machines for the type of cryptocurrency being mined, addresses of mining pools, and the cryptographic script that is fed to the individual hashboards. The Miners do not have the capability of connecting to a storage unit such as a solid state drive or hard disk drive.
The principal function of the Miners is to perform hash calculations. Since the function of hash calculating is not a defined function within the tariff, and the subject Miners are 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[.]” Explanatory Note 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 Miners perform the function of hash calculations independently and apart from other machines. Therefore, the Miners are classified in heading 8543, HTSUS.
For all the aforementioned reasons, we hereby affirm NY N297495. Accordingly, the subject Miners remain classified in heading 8543, HTSUS, specifically in subheading 8543.70.99, HTSUS, as “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other: Other.”
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division