CLA-2 OT:RR:CTF:TCM H126020 TNA
Paul S. Anderson, Esq.
Sonnenberg & Anderson
125 South Wacker Drove
Suite 1825
Chicago, IL 60606
RE: Revocation of HQ H097095; Classification of the SCT Livewire flash device/tuner
Dear Mr. Anderson:
This is in response to your request for reconsideration, dated September 23, 2010, made on behalf of SCT, LLC (“SCT”), of Headquarters Ruling Letter (“HQ”) H097095, dated August 2, 2010, which classifies SCT’s Livewire flash device under the Harmonized Tariff Schedule of the United States (“HTSUS”). We have reviewed this ruling and found it to be in error. For the reasons that follow, we hereby revoke HQ H097095. In coming to this conclusion, we have taken into account arguments presented to members of my staff at a meeting in our office on May 26, 2011, and in a supplemental submission dated June 10, 2011.
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 proposing to revoke HQ H097095 was published in the Customs Bulletin, Vol. 46, No. 21, on May 16, 2012. CBP received no comments in response to this notice.
FACTS:
The subject merchandise, SCT’s “Livewire,” (hereinafter “the Livewire”) is a handheld device designed to program the powertrain control module (PCM) of a Ford automobile. It features 128MB of total memory, an internal printed circuit board assembly (“PCBA”), an LCD display with a push/scroll jog wheel, indicator lights, and directional buttons. The product is fitted with a USB plug, which enables connection to an automobile. It retails for approximately $509-$569.
The Livewire is used to download (i.e., “flash”) “tunes” onto the vehicle’s PCM. These tunes are essentially the rules that the PCM follows in its onboard activities of regulating and controlling the vehicle’s engine and transmission. The user may use one of 20 pre-loaded performance tunes, which adjust the vehicle’s parameters to increase horsepower or torque, or the pre-loaded fuel economy tune, which adjusts the vehicle’s parameters to maximize fuel efficiency. The user may also download custom tunes onto the Livewire through an authorized SCT dealer or from the SCT website; these custom tunes are developed specifically for a customer’s vehicle and performance objectives. The Livewire both downloads (i.e., “flashes”) the tune data to the PCM and uploads data received back from the PCM, some of which appears in a digital readout format on its screen. When the Livewire uploads the selected tune onto the PCM, it saves the factory settings, thus allowing the user to restore the PCM to its original configuration whenever desired. Thus, the Livewire functions via active transmission of data, rather than simply reading information.
The Livewire also reads and stores performance data from the PCM. This data-logging function allows the user to monitor the vehicle performance metrics such as horsepower, torque, RPM, quarter-mile elapsed time, and zero-to-sixty time. It can also store and convey historical performance-related data, as well as analyze data from the vehicle PCM and compare it to factory-established norms of each vehicle parameter.
The Livewire is also capable of reading, resetting and clearing diagnostic trouble codes that emanate from the PCM. The codes correspond with electronic components throughout the motor vehicle and provide the user with clues as to what may be causing problems with the motor vehicle as the user communicates with the vehicle manufacturer’s service department. These functions are accomplished by way of the code reader and data recorder/monitor that are incorporated into the Livewire.
In HQ H097095, dated August 2, 2010, CBP classified the subject merchandise under subheading 9031.80.80, HTSUS, as: “…checking instruments, appliances and machines, not specified or included elsewhere in [Chapter 90]…: Other instruments, appliances and machines: Other….” In requesting reconsideration, counsel argues that the Livewire is classified in subheading 8517.62.00, HTSUS, as “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; …: 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.” In the alternative, counsel advocates for classification in subheading 8517.69.00, HTSUS, as “…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; …: 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): Other.”
ISSUE:
Whether the Livewire flash device is classified in heading 8517, HTSUS, as “[O]ther apparatus for the transmission or reception of voice, images or other data… other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528,” or under heading 9031, HTSUS, as “Measuring or checking… machines, not specified or included elsewhere in [Chapter 90]”?
LAW AND ANALYSIS:
Classification under the Harmonized Tariff Schedule of the United States (HTSUS) is made in accordance with the General Rules of Interpretation (GRI). 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.
The HTSUS provisions under consideration are as follows:
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:
9031 Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof:
Legal Note 1(m) to Section XVI, HTSUS, which includes heading 8517, HTSUS, states, in pertinent part, the following:
1. This section does not cover:…
(m) Articles of chapter 90
Legal Note 3 to Section XVI, HTSUS, states, in pertinent part, the following:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other 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 or as being that machine which performs the principal function.
Legal Note 3 to Chapter 90, HTSUS, states in pertinent part, the following:
The provisions of notes 3 and 4 to section XVI apply also to this chapter.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs 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).
The EN to heading 8517, HTSUS, states, in pertinent part, the following:
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, telegraphy, radio-telephony, radio-telegraphy, local and wide area networks.
The EN to heading 9031, HTSUS, states, in pertinent part, the following:
(I) MEASURING OR CHECKING INSTRUMENTS, APPLIANCES AND MACHINES
(A)
These include:…
(4) Apparatus for testing and regulating vehicle motors, for checking all parts of the ignition system (coils, sparking plugs, condensers, batteries, etc.), for ascertaining the best carburettor setting (by analysing exhaust gases), or for measuring the compression in the cylinders.
In your request for reconsideration, you argue that the Livewire is described by the terms of heading 8517, HTSUS, which provides in part for “…other apparatus for the transmission or reception of voice, images or other data, …other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528…” by way of GRI 1, Note 1(m) to Section XVI, HTSUS, and Note 3 to Section XVI, HTSUS. You argue that the Livewire’s “tune” capacity, in addition to its data logging, diagnostic, and scan tool functions, makes Note 3 applicable, and that, because the “tune” function constitutes the Livewire’s principal function, it should be classified in heading 8517, HTSUS.
Note 1(m) to Section XVI directs our analysis to heading 9031, HTSUS, before we can examine the merits of classification under heading 8517, HTSUS. If the subject merchandise is classified in heading 9031, HTSUS, it is excluded from chapter 85, HTSUS, pursuant to Note 1(m). As a result, we first examine whether the Livewire is classified in heading 9031, HTSUS, as a “checking instrument, appliance [or] machine, not specified or included elsewhere in [Chapter 90].” We note that whereas heading 9031, HTSUS, provides for “measuring or checking instruments,” there is no dispute that the Livewire is not a measuring device. As a result, we focus on determining whether it can be considered a “checking” device.
The term “checking” of heading 9031, HTSUS, is not defined in the HTSUS or in the ENs. In United States v. Corning Glass Works, 66 CCPA 25, 27 (1978), however, the court examined the classification of machines used to inspect drug-containing ampuls for foreign matter in the drug solution, and for defects in the ampuls. See United States v. Corning Glass Works, 66 CCPA 25, 26 (1978) (“Corning Glass Works”). In deciding whether the merchandise was a checking device, the court examined dictionaries to define the term “check.” Id. at 27. The court defined “check” as “to inspect and ascertain the condition of, especially in order to determine that the condition is satisfactory; … investigate and insure accuracy, authenticity, reliability, safety, or satisfactory performance of …; to investigate and make sure about conditions or circumstances….” Id. at 27. Applying that definition, the court found that the provision for “checking instruments” clearly and unambiguously encompassed machines that carried out steps in a process for inspecting ampuls to determine whether they conformed to an imperfection-free standard. Id. at 27. Since then, CBP has adopted a correspondingly broad definition of the term “checking.” We have consistently ruled that machines which carry out steps in the process of checking are classifiable under that provision, even if they do not actually perform the checking operation itself. See HQ 089391, dated February 6, 1992; HQ 953382, dated April 15, 1993; and HQ H009364, dated November 23, 2009.
Despite its breadth, we agree with SCT that this definition of “checking” does not encompass all of the Livewire’s functions. It is clear that the Livewire is capable of ascertaining the PCM’s current conditions, and that this is a checking function; however, it is not the Livewire’s only function. The Livewire also flashes tunes that change the way the vehicle’s engine works. The tunes function by way of data transfer rather than simply the reading of information. This tune transmission is not a “checking” function because it does not inspect or ascertain the condition of the PCM; nor does it investigate and insure accuracy, authenticity, reliability, safety, or satisfactory performance of the PCM. See Corning Glass Works, 66 CCPA 25. The Livewire also does not “carry out steps” in a larger checking process. As a result, it is not completely described by the terms of heading 9031, HTSUS, as a checking device. Thus, we examine other headings.
Note 3 to Section XVI, of which heading 8517, HTSUS, is a part, states that:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other 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 or as being that machine which performs the principal function.
Note 3 to Chapter 90, HTSUS, states that:
The provisions of notes 3 and 4 to section XVI apply also to this chapter.
The subject Livewire is a machine designed to perform multiple functions described in Section XVI, HTSUS, and Chapter 90, HTSUS, such as data transmission (heading 8517, HTSUS); data storage (heading 8471, HTSUS); data reading and recording (heading 8471, HTSUS); and checking (heading 9031, HTSUS). As per Note 3 to Chapter 90, HTSUS, Note 3 to Section XVI, HTSUS, also applies to Chapter 90, HTSUS. As a result, the Livewire, which is a machine designed to perform multiple complementary functions, is classified according to its principal function.
In our view, the flashing of the Livewire’s tunes constitutes its principal function. The Livewire is advertised primarily as a tuner, while its data-monitoring and other capabilities are advertised as incidental to the tuning capacity. SCT’s website describes the good as a “programmer” and highlights its tuning capacity, as follows:
[the Livewire] comes pre-loaded with dyno proven tune files that increase horsepower and torque! Programming your vehicle with one of SCT’s pre-loaded performance or fuel economy tune files is as easy as 1-2-3…With a huge backlit display, the SCT SF3 Power Flash makes it easy to read the Built-In Data Logging or Real Time Monitored Vehicle Data, view popular sensor data such as EGT, Air / Fuel Ratio or any other 0-5 Volt source!
Consumer reviews also show that consumers purchase the Livewire primarily for the tunes, so as to be able to improve such aspects as fuel mileage and other vehicle functions: “it improved my fuel mileage in my diesel and I like the power gain,” one consumer writes. See, e.g., http://www.autoanything.com/performancechips/ 61A3576A0A0.aspx.
At the same time, code readers and data recorders, which are the tools through which the Livewire performs its data storage and diagnostic capabilities, can be purchased separately for far less than the $509-$569 for which the Livewire retails. A consumer is therefore unlikely to purchase the Livewire solely for its data storage or diagnostic capabilities. As a result, we find that these functions are secondary to the Livewire’s capacity to flash the tunes, and the tunes constitute the Livewire’s principal function.
Heading 8517, HTSUS, provides for “…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.” The tunes function by way of data transfer because they transfer data between the PCM and the Livewire. As a result, we find that the principal function of the Livewire is described by heading 8517, HTSUS.
HQ H097095 relied on prior CBP rulings to classify the Livewire in heading 9031, HTSUS. For example, the Modic III diagnostic computer at issue in NY F81576, dated February 2, 2000, was classified in heading 9031, HTSUS, because it was a diagnostic device used for retrieving trouble codes from the vehicle PCM. While the Modic II performed many functions, its main function was to diagnose faults using its parameter checking function. This is in contrast to the Livewire, who main function is its tuning function, a function that is described by heading 8517, HTSUS.
HQ H097095 also relied on NY R05134, dated November 20, 2006, and NY N019301, dated November 28, 2007. NY R05134 classified an on-board diagnostics code reader that read its vehicles’ trouble codes and displayed them on an LCD screen. The user manual contained a list of the trouble codes the code reader displayed. NY N019301 classified the Porty EVO III, a device which collects and stores the diagnostic data received from the automobile’s diagnostic equipment, thereby acting as an interface between the automobile and diagnostic equipment. Thus, the only function of the merchandise in these rulings was to receive, collect, store and display data on the way the vehicle functioned, data that allowed the user to ascertain whether the vehicle was functioning properly. By contrast, the Livewire, while it performs these functions, is used mainly to change a vehicle’s performance via a separate mechanism (i.e., the tunes), irrespective of how well the vehicle may be functioning.
Lastly, we acknowledge that the ENs to heading 9031, HTSUS, states that the heading covers measuring or checking devices that test and regulate vehicle motors, such as those for checking all parts of the ignition system. See EN 90.31. Because the subject Livewire’s tunes are used to change many aspects of a car’s functioning, they can be seen as a regulatory function. However, the terms of the heading themselves are of a higher importance than the ENs, and the term “checking,” as it is defined by the court in Corning Glass Works, does not encompass all of the Livewire’s functions. As such, the Livewire is not completely described by heading 9031, HTSUS. As a result, as per Note 3 to Section XVI, HTSUS, and Note 3 to Chapter 90, HTSUS, we find that the subject Livewire is classified in heading 8517, HTSUS, as an “…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.”
HOLDING:
Under the authority of GRI 1, Legal Note 3 to Section XVI, and Legal Note 3 to Chapter 90, HTSUS, the Livewire Flash Device is provided for in heading 8517, HTSUS. Specifically, it is classified under subheading 8517.62.00, HTSUS, as “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: 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.” The column one, general rate of duty is free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
HQ H097095, dated August 2, 2010, is REVOKED.
In accordance with 19 U.S.C. §1625(c), this action will become effective 60 days after publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division