R:C:S 559060 DLD
District Director of Customs
111 W. Huron Street
Room 603
Buffalo, NY 14202-2378
RE: Decision on Application for Further Review of Protest No.
0901-94-101945. Subheading 9810.00.60 (HTSUS): Duty Free
Treatment of Scientific Instruments
Dear Sir:
This protest was filed against your decision in the
liquidation as dutiable of a ring transducer and associated
connector[s] imported by the University of Rochester Medical
Center, Rochester, New York.
FACTS:
The University of Rochester Medical Center placed an order
on May 18, 1993, with a Japanese manufacturer for a ring
transducer to be made in accordance with the University's
specifications. On August 17, 1993, Professor Robert C. Waag
applied to Customs Headquarters for duty-free entry of the ring
transducer under subheading 9810.00.60, HTSUS. The application
was denied on November 5, 1993. The denial letter stated as the
basis for the denial:
It is our determination that the ring transducer
and associated connector are not eligible for duty-free
treatment under subheading 9810.00.60, HTSUS. On
September 16, 1993, we asked what other equipment must
be added to this transducer and connector in order to
conduct your scattering and image reconstruction
experiments and what would be its cost. You replied on
October 11, 1993, that:
Use of the transducer requires electronics
that also must be custom built. The
electronics consists of a multiplexer unit
for transmit and receive, transmit circuitry,
receive circuitry, and a control unit. We
have just contracted with a vendor in the
United States to make the control unit for a
cost of $160,000.
The price of the imported transducer is $70,000, whereas the
cost of just one of the components needed to comprise the
instrument which is being built in your lab is more than
twice that amount. Accordingly, the transducer and connector
must be considered to be components of a larger instrument
being assembled in the U.S. Pursuant to subsection 301.2(k)
of the joint regulations of the Department of Commerce and
the Department of the Treasury (15 CFR 301.2(k)), a com-
ponent of an instrument is a pan or assembly of parts which
is substantially less than the instrument to which it
relates. A component enables an instrument to function at a
specified minimum level. That is, a component is a necessary
part of an instrument but is not itself an instrument.
Components are not eligible for duty-free treatment under
subheading 9810.00.60, HTSUS.
On June 1, 1994, the ring transducer entered the Customs
territory of the U.S. On October 28, 1994, the entry was
liquidated as dutiable on the basis of the above denial of duty-free entry under subheading 9810.00.60, HTSUS. A protest was
timely filed with the Buffalo, New York District Director on
December 13, 1994. The protest was subsequently forwarded to
Customs Headquarters for further review pursuant to 19 CFR
174.24(c). This is the response of Customs Headquarters to the
protest.
The protest argues that duty-free entry should be allowed
because:
1. The imported transducer should be considered to be an
instrument and not a component. Hence, it is eligible for
duty-free treatment because it is the chief and central
element of the final device.
2. The electronics to be added in the U.S. should be
considered "accessories" not "components.": Hence, they are
in a sense, optional and not necessary for the functioning
of the final device.
3. Although the cost of the electronics to be added in the
U.S. is $160,000, the final device could function with other
electronics. For example, some was recently acquired, the
cost of which is no more than $1,600. (Note that the
University of Rochester letter of October 11, 1993, quoted
above states: "We have just contracted with a vendor in the
United States to make the control unit [alone] for
$160,000." But Note 1 of the protest now states that the
total cost of all the items to be added in the U S. is
$160,000.)
ISSUE:
Does a ring transducer and associated connector imported by
the University of Rochester Medical Center qualify as a
scientific instrument or apparatus under subheading 9810.00.60,
HTSUS?
LAW AND ANALYSIS:
Pursuant to subsection 301.2(h) of the regulations, an
accessory may be either "pan of an instrument or an attachment to
an instrument" (15 CFR 301.2(h)). Subsection 301.2(k)
distinguishes between a component and an accessory as follows: "A
component enables an instrument to function at a specified
minimum level, while an accessory adds to the capability of an
instrument" (15 CFR 301.2(k)). As previously cited in the
November 5, 1993, denial letter, the regulations state that a
component is a pan or assembly of pans which is "substantially
less" than the instrument to which it relates. Accessories are
eligible for duty-free treatment under subheading 9810.00.60,
HTSUS, but components are not.
Customs agrees that the ring transducer, elements and
connectors, with the other pans of the importation, i.e., the
tank and lens, comprise the heart of the final device. But the
imported pans when assembled cannot function as an instrument.
The question to be decided is, whether the additional pans, e.g.,
electronics, etc., required to make the device function to
measure scattering or to operate as a novel imaging system are
substantial and comprise an important part of the final device,
or are minor, subsidiary and incidental in nature. One would
obviously not deny duty-free entry to an imported device which
lacked only an electric power cord to make it functional.
When the applicant was asked what other equipment must be
added to conduct his proposed experiments, he replied that
electronics costing $160,000 was required. But when this caused
the application to be denied, he stated that the device could be
operated with electronics costing one hundredth that amount. (In
fairness, it should be said that this latter equipment was
purchased after the application had been denied and therefore
could not have been mentioned in response to our query.) Customs
has in the past denied other duty-free applications for
transducers for which the electronics had to be added in the U.S.
to make the device function.
In any case, the protestant has failed to establish that
the importation alone can perform a scientific function after
assembly. While the protestant states that "[t]he ring transducer
is, in fact, quite functional when used with other electronic
control and data acquisition systems", the fact remains that the
device requires additional electronics in order to function in
its intended uses and cannot function without it. Such added
electronics must therefore be considered "components" of the
final instrument pursuant to 15 CFR 301.2(k) since it "enables an
instrument to function at a specified minimum level". The
imported items (and the item resulting when they are assembled)
must also be considered components inasmuch as they cannot
function as an instrument and require other electronic components
to make an operational instrument. Components are not eligible
for duty-free treatment under subheading 9810.00.60, HTSUS.
HOLDING:
The protest is denied in full. It is affirmed that the ring
transducer and associated imported parts, alone or when
assembled, do not comprise an "instrument", but are "components"
of an instrument being assembled in the U.S. and are therefore
ineligible for duty-free treatment under subheading 9810.00.60,
HTSUS, pursuant to 15 CFR 301.2(k).
In accordance with Section 3A( 11 )(b) of Customs Directive
099 3550-065, dated August 4, 1993, Subject: Revised Protest
Directive, a copy of this decision should be attached to the
Customs Form 19 and mailed by your office to the protestant as
part of the notice of action on the protest no later than 60 days
from the date of this letter. Any reliquidation of the entry in
accordance with the decision must be accomplished prior to
mailing of the decision. Sixty days from the date of the decision
the Office of Regulations and Rulings will take steps to make the
decision available to Customs personnel via the Customs Rulings
Module in ACS and the public via the Diskette Subscription
Service, Freedom of Information Act and other public access
channels.
Sincerely,
John Durant, Director
Commercial Rulings Division