CLA-2 RR:CR:GC 960560 DWS

Port Director of Customs
1 East Bay Street
Savannah, GA 31401

RE: Protest 1703-97-100078; Telephone Directory Printing Press Components

Dear Port Director:

The following is our decision regarding Protest 1703-97-100078 concerning your action in classifying and assessing duty on telephone directory printing press components under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise consists of telephone directory printing press components contained within four entries. It is claimed that together, the four entries contain a disassembled reel-fed offset printing press for the production of telephone directory pages. The primary components of the press are two mechanized reel stands, two printing towers, and a double-width folder. Each reel stand feeds a continuous paper web through one of the printing towers, where four separate units use an offset printing process to print both sides of the paper web using four different colors. After emerging from the printing towers, the two printed paper webs enter the double-width folder, which folds the paper webs into two 64 page signatures (groups of pages) to be bound into telephone directories. Each printing tower consists of four separate printing units, supported and positioned one above the other and integrated into a single structure by iron and steel structural components. The entire printing press measures 76 feet in length, 29 feet in height, 14 feet in width, and weighs approximately 850,000 pounds.

Because of the size of the printing press, it was disassembled and packed in four separate shipments shipped on four different vessels from Germany to Savannah, Georgia. Entry 500-0611664-9 consists mainly of four of the eight printing units and miscellaneous components. Entry 500-0611830-6 consists mainly of the other four printing units and the control desks. Entry 500-0611454-5 consists mainly of the two paper reel stands and miscellaneous components. Entry 500-0611459-4 consists mainly of the double-width folder and the structural components of the printing press.

The merchandise was entered under subheading 8443.11.50, HTSUS, as other reel-fed, offset printing machinery. The entries were liquidated on December 27, 1996, in the HTSUS provisions describing the goods contained within the entries. Specifically, for the classification portion of this protest, it is our understanding that your office classified components in entries 500-0611454-5, 500-0611664-9, 5000611459-4, and 500-0611830-6, including the girders, frames, and other structural components of the printing press structure, under subheading 7308.90.95, HTSUS, as other structures. Drive motors and motors for circumferential register and chain drives contained in entry 500-0611830-6 were liquidated under subheading 8501.40.60, HTSUS, as other AC motors, single-phase. For entry 500-0611454-5, in a Customs Form 29 (Notice of Action) dated December 10, 1996, claimed that the components contained therein are commingled, stating that sufficient information on the components was not furnished by the protestant, Stevens Graphics, Inc. (Stevens). The protest was timely filed on March 26, 1997.

In the amended protest, Stevens states that it imported an offset printing press from Koenig & Bauer-Albert, A.G./Motter ("KBA") in Germany, and that most of it was imported in four shipments. It is claimed that per KBA's arrangements, other third party suppliers delivered portions of the printing press to Stevens in Atlanta, Georgia, and were not included as part of the four shipments at issue. Stevens claims that the articles in KBA invoice 96/037 were not actually contained in the entries, at issue, but that Stevens erroneously included the value of the goods in the entry summaries. The articles claimed to be not dutiable because they were not imported or because they were imported duty paid are as follows:

Certain Allen-Bradley electrical control cabinets in the amount of $1,020,000, manufactured by Allen-Bradley in Wisconsin and shipped directly from Wisconsin to Atlanta;

16 Ryco water control cubicles manufactured by Ryco in Illinois and shipped directly from Illinois to Atlanta;

Cut-off controls, web-break detectors, web guide systems, and color-to-color register devices manufactured by Web Printing Controls, in Illinois, also shipped directly from Illinois to Atlanta;

Ink levelers and ink agitators manufactured by Master Flo Technology ("Master Flo") in Canada, shipped directly from Canada to Atlanta and duty paid by Master Flo; and

Roll handling system from MEG, S.A. a French company, which MEG purchased from HOVAIR Systems, in Seattle, Washington, who manufactured the roll handling system and shipped it directly from Seattle to Atlanta

Stevens also claims that 16 Allen-Bradley electrical control cabinets were exported from Wisconsin to KBA in Germany, where KBA assembled them into the printing units for the printing press, and should be eligible for duty-free treatment under subheading 9802.00.80, HTSUS. Stevens states that it originally believed that 16 "control cubicles" in KBA invoices 96/032 and 96/036 were 16 Ryco water control cubicles. Steven now amends its protests since the Ryco water control cubicles were actually in KBA invoice 96/037, and the 16 "control cubicles" in KBA invoices 96/032 and 96/036 were actually the electrical control cabinets manufactured by Allen-Bradley in Wisconsin.

Stevens states that the Allen-Bradley electrical control cabinets were first sold to an Allen-Bradley affiliate in Germany for $245,000, who sold them to KBA for $245,000, and that the value of the electrical controls upon importation was the same as their value when originally exported to Germany. Stevens states that KBA assembled the electrical control cabinets onto the printing units by mechanically attaching them to the printings units using nuts, bolts, and hinges, and by electrically wiring the electrical control cabinets into the printing units. It is stated that the KBA assembly process amounted to nothing more than attaching the Allen-Bradley electrical control cabinets to the sides of the printing units and connecting the required wiring.

Stevens states that it has been unable to obtain the exact date or port from Allen-Bradley when the electrical control cabinets were exported from the U.S., but it is believed to be sometime between December 8, 1995, and March 21, 1996. Stevens states that it then imported the electrical control cabinet/printing unit assemblies in entries 500-0611664-9 and 500-0611830-6. A declaration from Heinz Schmid on behalf of the assembler, KBA, and an endorsement from Stevens, the importer, are included.

ISSUE:

Whether the components contained in the four separate entries together constitute an incomplete and unassembled reel-fed, offset printing press, imparting the essential character of a complete printing press.

Whether the paper reel stands and double-width folding machine are classifiable under subheading 7308.90.95, HTSUS, as other structures of iron or steel, or under subheading 8443.60.00, HTSUS, as machines for uses ancillary to printing.

Whether certain components contained in entries 500-0611664-9 and 500-0611830-6 impart the essential character of complete reel-fed, offset printing presses classifiable under subheading 8443.11.50, HTSUS, as other reel-fed, offset printing machinery.

Whether the remaining components contained in the four entries are classifiable under subheading 7308.90.95, as other structures of iron or steel, or under subheading 8443.90.50, HTSUS, as parts of printing machinery.

Whether the electrical control cabinets qualify for the partial duty exemption under HTSUS subheading 9802.00.80, when imported into the U.S.

Whether enough evidence is submitted to substantiate that the articles on KBA invoice 96/037 are not subject to duty.

LAW AND ANALYSIS:

CLASSIFICATION

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 1996 HTSUS provisions under consideration are as follows:

7308 Structures (excluding prefabricated buildings of heading 9406) and parts of structures (for example, bridges and bridge sections, lock gates, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel:

7308.90 Other:

Other:

7308.90.95 Other.

* * * * * * * * *

8443 Printing machinery, including ink-jet printing machines, other than those of heading 8471; machines for uses ancillary to printing; parts thereof:

Offset printing machinery:

8443.11 Reel-fed:

8443.11.50 Other.

8443.60.00 Machines for uses ancillary to printing.

8443.90 Parts:

8443.90.50 Other.

* * * * * * * * *

We will first consider whether, in accordance with GRI 2(a), the components contained in the four separate entries together constitute an incomplete and unassembled reel-fed, offset printing press, imparting the essential character of a complete printing press (we use the term incomplete as counsel states that some components of the printing press are sourced in the U.S.). GRI 2(a) states that:

[a]ny reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

In HQ 954820, dated December 13, 1993, which dealt with whether two separate shipments of printing press components together constitute a complete and unassembled printing press, we stated that:

[i]t is well settled that articles which are not imported together are precluded from being an entirety. U.S. v. Baldt Anchor, Chain & Forge Division of Boston Metals Co., 59 CCPA 122, C.A.D. 1051, 429 F.2d 1403 (1972). The term "entirety", which was used in the Tariff Schedules of the United States (TSUS), is embodied in GRI 2(a) of the HTSUS. ***** The shipment of the various parts and the shipment of the main printing head do not together constitute a complete and unassembled flexographic printing press. The two shipments arrived at the port of Savannah on two different dates, and, under Baldt Anchor, they cannot together constitute a complete printing press as if the shipments were entered at the same time. The fact that the main printing head was intended to be included in the subject shipment is irrelevant as to the classification of the subject parts. See HQ 081999, dated December 10, 1990.

With regard to the subject components, they were packed in four separate shipments, shipped on four different vessels, and entered on four different days. Therefore, in keeping with the reasoning in HQ 954820, it is our position that the subject components together do not constitute an incomplete and unassembled printing press imparting the essential character of a complete reel-fed, offset printing press classifiable under subheading 8443.11.50, HTSUS.

As stated above, for entry 500-0611664-9, your office, in a Customs Form 29 Notice of Action dated December 10, 1996, claimed that the components contained therein are commingled, stating that sufficient information on the components was not furnished by the protestant, Stevens Graphics, Inc. (Stevens). However, based upon a review of the documentation provided by your office, it is inconclusive whether the components contained in the entry constitute a commingling of goods. See General Note 17, HTSUS.

Counsel for Stevens states that all the goods contained in entry 500-0611454-5 are parts of the subject printing press and therefore should be classifiable under subheading 8443.90.50, HTSUS. However, apart from reiterating that the components are integral to the operation of the press and specially designed for use with the printing press, we find that no convincing evidence has been provided demonstrating such. Based upon a review of counsel's attachments and the provided entry documents, it appears that the components are mostly general purpose in nature, capable of use with other products. For instance, counsel has attached a depiction of the completed printing press. The depiction indicates that a number of the structural elements (i.e., I-beams, railings, and walkways) are standard structural elements which do not appear to have been modified for use specifically with the subject printing press. The articles appear to be capable of use in various types of structures or as support elements for various types of machinery. Because it is our position that requisite information has not been provided concerning the proper classification of the components contained in the entry, with the exception of the paper reel stands, it is our position that the components remain classifiable in heading 7308, HTSUS, as liquidated. See section 174.13, Customs Regulations (19 CFR 174.13).

Counsel, as an alternative claim, argues that the paper reel stands are classifiable under subheading 8443.60.00, HTSUS. 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 Explanatory Note 84.43 (pp.1339 - 1341) states:

*****

The heading also covers:

(1) - (2) *****

(3) Ancillary machinery (whether or not presented separately) such as feeders and folding machines, provided they are specially designed as ancillary machines to printing machines.

(I) ***** (II) MACHINES FOR USES ANCILLARY TO PRINTING

This group covers machines (whether or not presented separately) for uses ancillary to printing exclusively designed to operate with printing machines and used during or after the printing operation for feeding, handling or further working the sheets or rolls of paper.

As it is our understanding that the paper reel stands are designed for attachment to the printing press and serve to supply a continuous paper web to the printing press towers, we agree with counsel that they meet the description above for machines for uses ancillary to printing and are classifiable under subheading 8443.60.00, HTSUS. It is also our position that the double-width folding machine, contained in entry 500-0611459-4, is a machine for uses ancillary to printing classifiable under subheading 8443.60.00, HTSUS. See NY 803750, dated November 23, 1994, which held reel stands and folders to be classifiable under subheading 8443.60.00, HTSUS.

We will now deal with the classification of the printing units contained in entries 500-0611830-6 and 500-0611664-9. Counsel claims that, in accordance with GRI 2(a), the printing units impart the essential character of a complete printing press.

In HQ 954820, we also held that printing press components, imported together without the printing head, do not impart the essential character of a complete printing press. In the ruling, we stated that:

[t]he essential character of the printing press is not imparted by the shipment of various parts, but by the main printing head. Without the main printing head, it would be impossible for the printing press to function as intended. Therefore, the main printing head plays the primary role in relation to the use of the printing press.

It is our understanding that each printing unit is equivalent to the print head in HQ 954820. Therefore, we find that the printing units and the drive motors and motors for circumferential register and chain drives contained in entry 500-0611830-6, and the printing units in entry 500-0611664-9, impart the essential character of complete reel-fed offset printing presses and are classifiable under subheading 8443.11.50, HTSUS.

As with the components in entry 500-0611454-5, with regard to the remaining components in entries 500-0611830-6 and 500-0611664-9, because it is our position that requisite information has not been provided concerning their proper classification, it is our position that those components remain classifiable in heading 7308, HTSUS, as liquidated.

With regard to the components under protest contained in entry 500-0611459-4, it appears that, based upon a review of the relevant entry documents, they are mostly general purpose in nature. They are standard structural elements which do not appear to have been modified for use specifically with the subject printing press. The articles appear to be capable of use in various types of structures or as support elements for various types of machinery. Again, it is our position that those components remain classifiable in heading 7308, HTSUS, as liquidated.

SUBHEADING 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles ... assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations {19 CFR 10.16(a)}, provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

KBA invoices 96/032 dated April 19, 1996, and 96/036 dated April 26, 1998, each indicate that "8 control cubicles mounted to printing unit" (of U.S.-origin - later corrected by Stevens) were shipped from Germany to Stevens in Atlanta for $122,500 each. Allen-Bradley invoice NBC701-1 dated December 8, 1995, indicates that 16 unit couple panels (right and left sides) were shipped from Wisconsin to KBA in Germany for a total of $245,000, and billed to Allen-Bradley in Germany. German Customs Form 0747 dated March 21, 1996, indicates that the exporter, Allen-Bradley shipped 16 boxes valued at $245,000 to the importer KBA in Germany. A declaration dated March 25, 1997, is submitted from Terry Knapper, Supervisor of Transportation, Drives and Motion Control of Allen-Bradley, stating that in 1996, Allen-Bradley sold printing press electrical controls to an Allen-Bradley affiliate in Germany, which in turn sold them to KBA to be, as indicated by KBA, incorporated into a reel-fed offset twin tower Commander printing press which KBA sold to Stevens, in Atlanta.

In a declaration from Heinz Schmid, Vice President of Sales of KBA dated July 3, 1997, it is indicated that the 16 control cubicles in KBA invoices 96/032 and 96/036 were actually electrical control cabinets manufactured by Allen-Bradley in Wisconsin and that the printing units were assembled in part from these electrical control cabinets. He states that after being manufactured in Wisconsin, they were exported to KBA in Germany in a condition ready for assembly without further fabrication. At KBA, the electrical control cabinets were assembled onto the printing units by mechanically attaching them to the printing units using nuts, bolts, and hinges and by electrically wiring them into the printing units. KBA did not further manufacture, fabricate, or process the electrical control cabinets in any way. The electrical control cabinets, after being assembled onto the printing units were sold to Stevens Graphics for $245,000.

Based upon the invoices, bills of lading, and declarations submitted, it is our opinion that sufficient evidence has been submitted to prove that the electrical control cabinets were manufactured in the U.S. by Allen-Bradley, such that they may be considered products of the U.S., and that they were exported to KBA in Germany. We also find that the operations of attaching the electrical control cabinets by mechanically attaching them to the printing units using nuts, bolts, and hinges and by electrically wiring them into the printing units are acceptable assembly operations pursuant to 19 CFR 10.16(a). Accordingly, we find that the printing units may receive a partial duty exemption under subheading 9802.00.80, HTSUS, with allowances in duty for the electrical control cabinets. Therefore, this portion of the protest should be granted.

ARTICLES NOT SUBJECT TO DUTY

Stevens Graphics also asserts that various articles included on KBA invoice 96/037, and included erroneously on the entries at issue, were not actually subject to duty because they were actually shipped per KBA's instructions by third parties from other areas in the U.S. to Atlanta; or if imported were duty paid by third parties before shipment to Atlanta.

KBA invoice 96/037 dated April 26, 1996, states that "we have sent through the sub supplier in U.S.A. insured up to plant in Atlanta".

A bill of lading dated April 19, 1996, is submitted indicating the shipment of electrical controls, instruments, motors and transformers from Allen-Bradley in Wisconsin to Steven Graphics in Atlanta. Two Allen-Bradley invoices no. NBC701-B3 dated April 12, 1996, and NBC701-B4 dated March 22, 1996, indicate that various articles, such as a 3 bay motor control center, auxiliary control enclosure, press control deck, and custom item were shipped from Allen-Bradley in Wisconsin to Steven Graphics in Atlanta. In the declaration from Mr. Schmid of KBA, he also declares that in 1995, KBA sold one twin-tower reel-feed offset Commander printing press with two M.E.G. reels, two printing towers, double width folder, and Allen-Bradley electrical drive to Stevens. Mr. Schmid also declares that the electrical controls for the press in KBA invoice 96/037 were manufactured by Allen-Bradley in Wisconsin and that they were shipped directly from Wisconsin to Atlanta. He also confirms that the 16 Ryco water control cubicles, cut-off controls, web-break detectors, web guide systems, color-to-color register devices, ink levelers and ink agitators, and roll handling system were either shipped from their place of manufacture in the U.S. directly to Stevens in Atlanta, or were duty-paid by some third party. The declaration from Mr. Knapper of Allen-Bradley (see above) also states that Allen-Bradley manufactured the electrical controls in Wisconsin and shipped them directly to Stevens Graphics in Atlanta.

A Ryco Graphic Manufacturing invoice 43775 dated May 10, 1996, indicates the sale of a digital plus dampening system and two folders from Ryco to KBA, but shipment to Stevens in Atlanta.

Web Printing Controls invoice 45945 dated May 24, 1996; invoice 45942a dated May 24, 1995; invoice 47227 dated August 22, 1996; invoice 47229 dated August 22, 1996; and invoice 45944 dated May 24, 1996; indicate the sale of various articles to Germany, but all shipped May 3, 1996, to Stevens in Atlanta. A bill of lading dated May 3, 1996, indicates the shipment of printing press parts from Illinois to Atlanta.

A Master Flo invoice 5757 dated June 4, 1996, indicates the sale of ink levellers to KBA but shipped from Canada to Stevens. A bill of lading dated June 4, 1996, indicates the same. A Customs Form 7501 shows Master Flo as the importer of the ink levellers entered on June 4, 1996. The same information is presented for the ink agitators.

A MEG invoice 961438 dated April 29, 1996, indicates the same circumstances with respect to the sale of a roll handling system to KBA with the final customer being Stevens, and the price is quote "CIF Atlanta (from Seattle/USA)." Additionally, a HOVAIR invoice 951434-2 dated November 15, 1996, indicates the sale of an 80" Star System to MEG in France, but shipped to Stevens on May 29, 1996. A bill of lading dated May 29, 1996, indicates the shipment from HOVAIR to Stevens.

Based upon the invoices, bills of lading, and declarations presented, it is our opinion that there is sufficient evidence to conclude that the various articles included on KBA invoice 96/037, and included erroneously on the entries at issue, were not actually subject to duty because they were actually shipped per KBA's instructions by third parties from other areas in the U.S. to Atlanta, or if imported were duty paid by third parties before shipment to Atlanta. According, this portion of the protest should be granted.

HOLDING:

CLASSIFICATION

In accordance with GRI 2(a), the components contained in the four separate entries together do not constitute an incomplete and unassembled reel-fed, offset printing press, imparting the essential character of a complete printing press.

The paper reel stands contained in entry 500-0611-454-5 and the double-width folder contained in entry 500-0611459-4 are classifiable under subheading 8443.60.00, HTSUS, as machines for uses ancillary to printing. With regard to these components, as re-classification of the merchandise as indicated above would result in the same rate of duty as claimed, you should ALLOW the protest.

In accordance with GRI 2(a), the printing units and the drive motors and motors for circumferential register and chain drives contained in entry 500-0611830-6, and the printing units contained in entry 500-0611664-9, impart the essential character of complete reel-fed, offset printing presses and are classifiable under subheading 8443.11.50, HTSUS. With regard to these components, the protest should be GRANTED.

The remaining components contained in the entries are classifiable under subheading 7308.90.95, as other structures of iron or steel. With regard to these components, the protest should be DENIED.

SUBHEADING 9802.00.80, HTSUS

On the basis of the information submitted, we find the sufficient evidence has been submitted to prove that the electrical control cabinets were manufactured in the U.S. by Allen-Bradley, and that they were exported to KBA in Germany. We also find that the operations performed in Germany are acceptable assembly operations pursuant to 19 CFR 10.16(a). Accordingly, we find that the printing units may receive a partial duty exemption under subheading 9802.00.80, HTSUS, with allowances in duty for the electrical control cabinets.

ARTICLES NOT SUBJECT TO DUTY

On the basis of the information submitted, we find that there is sufficient evidence to conclude that the various articles included on KBA invoice 96/037, and included erroneously on the entries at issue, were not actually subject to duty because they were actually shipped per KBA's instructions by third parties from other areas in the U.S. to Atlanta, or if imported were duty paid by third parties before shipment to Atlanta.

In accordance with Section 3(A)(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office to the Protestant no later than 60 days from the date of this letter. Any reliquidation of these entries in accordance with this 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