CLA-2 CO:R:C:G 085558 JMH

8471.99.15, 8471.99.60, 8472.92.20, 8472.92.40,
8473.30.40, 8473.30.80, 8507.30.00, 8517.40.10,
8524.90.40, 8543.80.90, 9027.20.40, 9902.84.71

Mr. Allan T. Low
U.S. Customs Manager
Hewlett Packard
P.O. Box 10301
Palo Alto, CA 94303-0890

RE: Microcomputer, modem, manuals, software, dot matrix printer, power cable, reusable Ni-Cad batteries, recharger/adapter, liquid chromatograph, VECTRA personal computer, and printed circuit board assemblies

Dear Mr. Low:

This is in response to your letter of June 9, 1989, requesting classification and country of origin rulings for seven shipments, Shipments A-G, of high technology goods under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). You also request a ruling for the seventh shipment, Shipment G, under the prior Tariff Schedule of the United States (TSUS). This ruling letter addresses the classification portion of your request. The country of origin portion of your request will be determined at a later date.

FACTS:

Hewlett Packard, a major multinational high technology company, is importing into the United States seven forms of shipments consisting of products manufactured throughout the world. You state that the following assumptions have been established:

1. Microcomputer: integrated central processing unit (CPU) and drive/storage housed in one cabinet.

2. VECTRA: a personal computer system consisting of separately housed CPU/drive, monitor, and keyboard presented together. (CPU contains a microprocessor capable of processing words greater than 8-bits in -2-

length and capable of directly addressing more than 8-MB of memory off the microprocessor.)

3. Liquid chromatograph: analytical equipment used in liquid chromatography classifiable under subheading 9027.20.40, HTSUSA.

4. None of the goods described as "U.S. goods returned" have been advanced in value or improved in condition.

Each shipment is discussed separately as follows:

Shipment A

FACTS:

This shipment is a microcomputer and its accessories from Mexico. It includes:

1. microcomputer - country of origin is Mexico 2. modem - country of origin is the United States 3. manuals for operating and reference - printed in the United States 4. "operating" software recorded on magnetic media - recorded in the United States 5. "applications" software recorded on magnetic media - recorded in the United States

ISSUE:

What is the appropriate classification for the microcomputer and its accessories?

LAW AND ANALYSIS:

The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...and according to the following provisions."

An examination of the headings establishes that the microcomputer, modem, software and manuals are each classifiable within different headings - headings 8471, 8517, 8524, and 4901, HTSUSA, respectively. These headings describe:

4901 Printed books, brochures, leaflets and similar printed matter, whether or not in single sheets...

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4901.99.00 Other...

* * * * * * * * * * * * *

8471 Automatic data processing machines and units thereof...

8471.20.00 Digital automatic data processing machine, containing in the same housing at least a central processing unit and an input and output unit, whether or not combined...

8471.91.00 Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units...

* * * * * * * * * * * * *

8517 Electrical apparatus for line telephony or telegraphy, including such apparatus for carrier-current line systems...

8517.40.10 Other apparatus, for carrier-current line systems...Modems, of a kind used with data processing machines of heading 8471...

* * * * * * * * * * * * *

8524 Records, tapes and other recorded media for sound or other similarly recorded phenomena

8524.90.40 Other...Other...

Three of the items, the microcomputer (heading 8471, HTSUSA), the modem (heading 8517, HTSUSA) and the software (heading 8524, HTSUSA) are found within Section XVI, HTSUSA. There are two relevant Section XVI notes which must be explored.

The first note, Section XVI, Note 3, HTSUSA, addresses composite machines. The note states:

Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole...are to be classified as if consisting only of that component or as being that machine which performs the principal function.

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The Explanatory Notes to Section XVI, assert that the two or more machines comprising the composite machine are "of different kinds...described in different headings...". Harmonized Commodity Description and Coding System (HCDCS), Vol. 3, p. 1133. Although the Explanatory Notes are not dispositive, they are to be looked to for the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The microcomputer and modem in question are classifiable within different headings and are different machines. However, it is this office's opinion that they do not form a composite machine because they are not "fitted together to form a whole." The Explanatory Notes define "fitted together to form a whole" as incorporating one machine within the other, mounting one on the other, or mounting both machines on a common base or frame or in a common housing. HCDCS, Vol. 3, p. 1133. The connection of a modem to a microcomputer by electrical wires does not constitute "fitted together to form a whole." Therefore, the microcomputer and its accessories are not a composite machine within Section XVI, Note 3, HTSUSA.

The second relevant section note, Section XVI, Note 4, HTSUSA, addresses functional units. The note states:

Where a machine...consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.

The Explanatory Notes express that a "functional unit" covers only those "machines and combination of machines essential to the performance of the function specific to the functional unit as a whole..." HCDCS, Vol. 3, p. 1133. The function specific to the goods in question is the operation of the microcomputer which is covered by heading 8471, HTSUSA. Each of the items in question is devoted to the function of the microcomputer. Therefore, it is the opinion of this office, that the microcomputer and its accessories are a "functional unit" to be classified within the classification for the microcomputer.

The microcomputer contains a CPU and drive/storage within one housing. Subheading 8471.20.00, HTSUSA, requires that a digital automatic data processing machine contain in one housing a CPU and an input/output unit. The microcomputer does not contain the input/output unit, and therefore, does not meet the terms of subheading 8471.20.00 as required by GRI 6, HTSUSA, and GRI 1. The proper classification for the microcomputer is within subheading 8471.91.00, HTSUSA. Therefore, the whole unit is classified within subheading 8471.91.00, HTSUSA. -5-

However, an examination of the applicable chapter notes reveals Chapter 85, Note 6, HTSUSA. This note states:

Records, tapes and other media of heading 8523...remain classified in those headings, whether or not they are entered with the apparatus for which they are interconnected.

The operating and applications software are classified within subheading 8524.90.40, HTSUSA. Thus, according to the chapter note, the software remains classified there regardless of the classification of the other merchandise with which it is imported.

Therefore, the microcomputer and its accessories result in two classifications. The functional unit of the microcomputer, the modem, and the manuals are classified together within subheading 8471.91.00, HTSUSA, as "Automatic data processing machines and units thereof...Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units..." The software is classified within subheading 8524.90.40, HTSUSA, as "Prepared unrecorded media for sound recording or similar recording of other phenomena...Magnetic discs...".

Shipment B

FACTS:

This shipment consists of a dot matrix printer and its accessories from Singapore. It includes:

1. dot matrix printer - country of origin is Singapore 2. power cable with connectors - country of origin is Mexico 3. reusable Ni-Cad batteries - country of origin is Japan 4. recharger/adapter - country of origin is Korea

ISSUE:

What is the appropriate HTSUSA classification for the dot matrix printer and its accessories?

LAW AND ANALYSIS:

You state that the dot matrix printer and its accessories are to be imported in one large carton and sold together. The same analysis used in shipment A is used in this instance. The dot matrix printer, power cable with connectors, reusable Ni-Cad batteries, and recharger/adapter are classifiable within -6-

different headings: headings 8471, 8473, 8507, and 8543, HTSUSA, respectively. These headings describe:

8471 Automatic data processing machines and units thereof...

8471.92.65 Input or output units, whether or not entered with the rest of a system, which may contain in the same housing one or two of the following types of units: storage units, input units, output units...Printer units...

* * * * * * * * * * * *

8473 Parts and accessories...suitable for use solely or principally with machines of headings 8469 to 8472...

8473.30.80 Parts and accessories of the machines of heading 8471...Other...

* * * * * * * * * * * * *

8507 Electric storage batteries, including separators therefor, whether or not rectangular (including square); parts thereof...

8507.30.00 Nickel-cadmium storage batteries...

* * * * * * * * * * * * *

8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof...

8543.80.90 Other...

If the subject items form a composite machine or a functional unit with the meaning of the Section XVI Notes, then they may be classified according to the article which gives the unit its principal function. As explained in the discussion of shipment A, articles which form a composite machine within the meaning of Section XVI, Note 3, HTSUSA, are "fitted together to form a whole." Once again, these articles are not mounted or incorporated together, nor are they mounted on a common base or frame. Therefore, the dot matrix printer and its accessories are not a composite machine.

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It is the opinion of this office that the dot matrix printer and its accessories form a "functional unit" within the meaning of Section XVI, Note 4, HTSUSA. Each of the goods "contributes to the clearly defined function" of the dot matrix printer. The classification appropriate to the function of the dot matrix is subheading 8471.92.65, HTSUSA, which describes "Automatic data processing machines and units thereof...Input or output units, whether or not entered with the rest of a system and whether or not containing storage units in the same housing...Printer units..."

Shipments C, D, E, and F

FACTS:

Shipments C, D, E, and F each consist of a system composed of a liquid chromatograph and a VECTRA personal computer. The systems are designed to perform and analyze liquid chromatography. The shipments vary only by the country of origin of the products.

Shipment C: This shipment is a system from West Germany. It includes:

1. liquid chromatograph - country of origin is West Germany 2. VECTRA personal computer system - country of origin for all units is the United States

Shipment D: This shipment is also from West Germany. It includes:

1. liquid chromatograph - country of origin is the United States 2. VECTRA personal computer system - country of origin for all units is West Germany

Shipment E: This shipment also is shipped from West Germany, but the personal computer is of mixed origins. The shipment contains:

1. liquid chromatograph - country of origin is West Germany 2. VECTRA personal computer a. CPU/Drive - country of origin is the United States b. other units - country of origin is France

Shipment F: This shipment is shipped from Japan. Thus, some of the goods are subject to the 100% duty sanction under subheading 9903.41.20, HTSUSA. The shipment includes:

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1. liquid chromatograph - country of origin is the United States 2. VECTRA personal computer a. CPU/Drive - country of origin is Japan b. other units - country of origin is Korea

ISSUE:

What is the appropriate classification for the liquid chromatograph and VECTRA personal computer system when shipped together from any country, regardless of the country of origin of the components?

LAW AND ANALYSIS:

The classification of the liquid chromatograph and the components of the VECTRA personal computer begins with GRI 1 which dictates that the headings, section notes and chapter notes be analyzed. There are two headings, one for each machine, involved in these shipments. The headings are 8471 and 9027, HTSUSA, which describe:

8471 Automatic data processing machines and units thereof...

8471.91.00 Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same housing one or two of the following types of units: storage units, input units, output units...

8471.92.20 Other...keyboards...

8471.92.40 Other...Other..with cathode ray tube...

* * * * * * * * * * * * *

9027 Instruments and apparatus for physical or chemical analysis...parts and accessories thereof...

9027.20.40 Chromatographs and electrophoresis instruments...

As discussed previously, Section XVI, Note 4, provides for the classification of "functional units" within the heading appropriate to the function of the unit. Chapter 90, Note 3, HTSUSA provides that Section XVI, Note 4 also applies to Chapter 90. Thus, Section XVI, Note 4 is applicable to heading 9027.

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In this instance, the chromatograph and the personal computer contribute together for the clearly defined function of analyzing substances. The computer merely runs the experiments. It is the chromatograph that actually performs the analytical function. Thus, the two machines of shipments C, D, E, and F would be classified as one functional unit within the chromatograph's classification.

The chromatograph and Vectra personal computer, when imported together, are a functional unit properly classified within subheading 9027.20.40, HTSUSA, as "Instruments and apparatus for physical or chemical analysis...parts and accessories thereof...Chromatographs and electrophoresis instruments..."

Shipment G

FACTS:

This final shipment consists of a series of printed circuit board assemblies (PCA's) from Mexico. The PCA's enable a user to upgrade the computer to a higher revision, greater logic capability and memory capacity. This upgrade is performed by exchanging certain critical PCA's in the computer with the PCA's in an "upgrade kit." The PCA's are packaged in individual boxes and shipped together with operating and reference manuals and literature in one large carton. A "typical" upgrade kit includes:

1. at least one each 4-MB memory board - country of origin is the United States 2. one memory controller board - country of origin is West Germany 3. one arithmetic logic unit board - country of origin is Mexico 4. one control and maintenance controller - country of origin is Mexico 5. one control process store - country of origin is Mexico

Items 3, 4 and 5 working in unison comprise the "motherboard" or CPU for the computer.

ISSUE:

Issue 1: What is the appropriate classification for the upgrade kit under the TSUS?

Issue 2: What is the appropriate classification for the upgrade kit under the HTSUSA?

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LAW AND ANALYSIS:

Issue 1: What is the appropriate classification for the upgrade kit under the TSUS?

The classification of merchandise under TSUS is governed by the General Headnotes. General Headnote 10(a) provides that imported goods be classified according to "the general, schedule, part and subpart headnotes, and the provisions describing the classes of imported article..." General Headnote 10 (ij) provides that a part is to be classified in an item for that part unless another item is more specific.

In this instance, the upgrade kit consists of five articles. These products are described in the inferior headings to Items 676.15 and 676.54, TSUS, for automatic data processing (ADP) machines, since the articles are intended to be incorporated into an ADP. A specific classification, Item 676.54, TSUS, exists for parts of these machines. Thus, each of the boards, as part of an ADP, is described within Item 676.54.

However, Headquarters Ruling Letter 554581, dated July 2, 1987, determined that a motherboard is an unfinished computer. Noting General Headnote 10(h), TSUS, an unfinished computer is classified within the item for a finished computer, Item 676.15, TSUS. Since the arithmetic logic unit board, the control and maintenance controller, and the control process store together constitute a motherboard they are an unfinished computer to be classified within Item 676.15.

You state that the three boards comprising the motherboard and the two memory expansion boards are a kit to be imported together. When two or more components are shipped together and intended to be used together, the concept of an entirety must be considered. If the goods are an entirety they are dutiable as one complete article. Articles may be regarded as entireties when the components, upon being joined, form a new article which has a character or use different from that of any of the parts, or when one of the components is predominant and the other parts are merely incidental to the predominant part. E.M. Stevens Corp. v. United States, 49 Cust. Ct. 203, Abstract 66971 (1962).

For the doctrine of entireties to apply, the articles must be imported together. Benrus Watch Co. et al. v. United States, 21 CCPA 139, T.D. 46467 (1933), cert. den. 291 U.S. 679, 54 SCR 529, 79 L. Ed. 1067 (1933); United States v. Baldt Anchor, Chain & Forge Division of the Boston Metals Co. et al., 59 CCPA 122, C.A.D. 1051, 459 F. 2d 1403 (1972); Trans-World Shipping Service, Inc. et al. v. United States, 58 Cust. Ct. 120, C.D. 2900 (1967).

The five printed circuit board assemblies in question are imported together and when joined operate to expand an ADP's -11-

capabilites. When functioning together, their character is different than any of the parts functioning separately. It is the opinion of this office that these five boards, when imported together, constitute an entirety. As an entirety the articles are dutiable together. The motherboard, as an unfinished computer, is the dominant component of this entirety. Therefore, the appropriate tariff provision for these articles is Item 676.15, TSUS, which describes "Accounting, computing and other data-processing machines..."

Issue 2: What is the appropriate classification for the upgrade kit under the HTSUSA?

As stated previously, the classification of merchandise under the HTSUSA is governed by the GRI's. GRI 1 states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...and according to the following provisions."

The applicable headings in this instance for the upgrade kit are heading 8471, HTSUSA, for the three boards comprising the "motherboard" and heading 8473, HTSUSA, for the memory expansion boards. As stated previously, the "motherboard" is viewed as an unfinished automatic data processing machine. GRI 2(a), HTSUSA, states that "[a]ny reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished..." Headings 8471 and 8473 state the following:

8471 Automatic data processing machines and units thereof...

8471.91.00 Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units...

* * * * * * * * * * * * *

8473 Parts and accessories...suitable for use solely or principally with machines of headings 8469 to 8472...

8473.30.40 Parts and accessories of the machines of heading 8471...Not incorporating a cathode ray tube...

When two or more headings are in contention GRI 3, HTSUSA, is implemented. GRI 3 states in pertinent part:

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When by application of Rule 2(b) or for any other reason, goods are prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods...and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

GRI 3(a) dictates that the most specific heading is preferred, unless the goods are mixed, composite or items in a set for retail sale and two or more headings apply to part of the goods. The PCA's are not a mixture or a composite good. So, to be classified according to GRI 3(b) the PCA's must constitute a "set."

To determine what is a "set" to implement this rule, the Explanatory Notes to the HTSUSA must be examined. The Explanatory Notes, although not dispositive, are to be looked to for the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). The Explanatory Note for Rule 3(b) gives a three part test for "sets for retail sale." Harmonized Commodity Description and Coding System (HCDCS), Vol. 1, p. 4.

The three step definition states "For the purposes of this Rule, the term 'goods put up in sets for retail sale' shall be taken to mean goods which:

(a) consist of at least two different articles which are prima facie, classifiable in different headings. (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and -13-

(c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards)." (emphasis added)

Since these three steps are listed in the conjunctive, all three must be met. First, the two memory boards and the three boards comprising the "motherboard" must be different articles, classifiable within different headings. The memory expansion boards are classifiable within subheading 8473.30.40, HTSUSA, as "...Parts and accessories of the machines of heading 8471..." The "motherboard" is classifiable within subheading 8471.91.00, HTSUSA, as "...Digital processing units..." The motherboard is further classified within subheading 9902.84.71, HTSUSA, which is a temporary free provision. At least two different headings are applicable. The first requirement is met.

Secondly, the articles must be put up to meet a particular need or activity. The PCA's are put together to meet a particular computer programming need. Thus, the second requirement is fulfilled.

Finally, the boards must be packed in manner a suitable for sale to the end user. You state that the PCA's are packaged together for sale directly to users without further packing. Therefore, the third requirement is met. The memory expansion boards and the "motherboard" are a "set" within the meaning of GRI 3(a) and (b), HTSUSA. However, since both headings 8471 and 8473 cover part only of the set, they are equally specific. Therefore, the PCA's cannot be classified according to GRI 3(a).

GRI 3(b), HTSUSA, requires that goods put up in sets for retail sale are to be classified according to the component that gives the goods their essential character. It is the opinion of this office that the characteristics of the "motherboard", as an unfinished ADP, are the dominant characteristics of the set. Therefore, the motherboard provides the essential character of the set. The upgrade kit is a set properly classified within subheadings 8471.91.00/9902.84.71, HTSUSA, as "Automatic data processing machines and units thereof...Digital processing units, whether or not entered with the rest of a system..."

HOLDING:

Shipment A, the microcomputer and its accessories are a functional unit within the meaning of Section XVI, Note 4, HTSUSA. The microcomputer, modem, and the manuals are properly classified within subheading 8471.91.00, HTSUSA, as "Automatic data processing machines and units thereof...Other...Digital processing units, whether or not entered with the rest of a system, which may contain in the same system, one or two of the following types of units: storage units, input units, output units..." Chapter 85, Note 6, HTSUSA requires that the software -14-

be classified separately within subheading 8524.90.40, HTSUSA, as "Prepared unrecorded media for sound recording or similar recording of other phenomena...Magnetic discs..."

Shipment B, the dot matrix printer and its accessories form a "functional unit" within the meaning of Section XVI, Note 4, HTSUSA. The classification appropriate to the function of the dot matrix is subheading 8471.92.65, HTSUSA, which describes "Automatic data processing machines and units thereof...Input or output units, whether or not entered with the rest of a system and whether or not containing storage units in the same housing...Printer units..."

The shipments of C, D, E, and F, the liquid chromatograph and the VECTRA personal computer are a functional unit as defined by Section XVI, Note 4. The clearly defined function of the unit is the analysis performed by the liquid chromatograph. Therefore, the shipments are properly classified within subheading 9027.20.40, HTSUSA, as "Instruments and apparatus for physical or chemical analysis...Chromatographs and electrophoresis instruments..."

Shipment G, the five printed circuit board assemblies, is a set put up for retail sale within the meaning of GRI 3(b). The "motherboard" gives the set its essential character. The upgrade kit is a set properly classified within the heading applicable to the "motherboard", subheading 8471.91.00/9902.84.71, HTSUSA, as "Automatic data processing machines and units thereof...Digital processing units, whether or not entered with the rest of a system..."

Sincerely,

John Durant, Director
Commercial Rulings Division