CLA-2 RR: CR: GC 964880 TPB
Donald Fischer
PricewaterhouseCoopers
333 Market Street
San Francisco, CA 94105
RE: Palm VII™ and Palm VIIx™ handheld electronic devices; Palm VII™ Series Retail Sets; Revocation of NY F89667.
Dear Mr. Fischer:
This is in response to your letter dated February 27, 2001, requesting reconsideration of New York Ruling Letter F89667, dated August 10, 2000, which was issued to counsel on behalf of Palm, Inc. (“Palm”), whom you are now representing. NY F89667 dealt with the classification of the Palm VII™ and Palm VIIx™ handheld electronic devices under the Harmonized Tariff Schedule of the United States (“HTSUS”). In that ruling, the Palm VII™ and VIIx™ were classified under subheading 8470.10.0060, HTSUS, which provides for pocket-size data recording, reproducing and displaying machines with calculating functions…other.
Pursuant to 625 (c), Tariff Act of 1930 (19 U.S.C. 1625 (c)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat. 2057, 2186 (1993), notice of the proposed revocation of NY F89667 was published on November 21, 2001, in the Customs Bulletin, Volume 35, Number 47. No comments were received in response to that notice.
FACTS:
The merchandise under consideration is the Palm VII™ and Palm VIIx™ handheld electronic devices. The Palm VII™ and Palm VIIx™ both measure 5.25 inches (13.34 cm) in height by 3.25 inches (8.26 cm) in width by .75 inches (1.91 cm) deep. The Palm VII™ and Palm VIIx™ employ the Palm Operating System version 3.2.0 (“Palm OS®”) that
controls the running of programs and the standard applications such as the date book, memo pad and calculator which are stored in saved memory and executed upon command. The Palm VII™ utilizes a Motorola M68EZ328 (16 MHz Microprocessor) central processing unit (“CPU”) and comes with 2 MB of installed random access memory (“RAM”) and 2 MB of installed read only memory (“ROM”). The Palm VIIx™ uses a Motorola M68VZ328 (24 MHz Microprocessor) CPU and comes equipped with 8 MB of installed RAM and 8 MB of installed ROM.
Both these Palm models include built-in two-way wireless radios with integrated antennas. They allow integrated wireless data access to the Internet without use of accessories. It is noted that the radio function is limited to Internet access and operates separately from most of the basic program functions. Both Palm models also include a touch sensitive keyboard, handwriting recognition software (Graffiti®) keyboard, an Infrared Port and LCD display screen.
The Palm VII™ and VIIx™ have pre-installed applications that feature a date book, address book, memo pad, to do list, desktop e-mail connectivity, expense tracking, calculator, HotSync® software (allowing local and remote synchronization with a user’s desktop computer), iMessenger™ application, Web clipping applications, and Internet-ready connectivity (with TCP/IP software to support Internet based applications). Additionally, the devices contain sufficient memory for the installation of other program functions available for the Palm series devices. The Palm VII™ and VIIx™ come with desktop organizer software (for installation on a desktop computer) which features a date book, address book, to do list, memo pad, expense report templates, TAB delimiter, TXT and desktop e-mail connectivity. As indicated by the handbook included with the sample, the software may be on a CD-ROM or diskettes.
The Palm OS® is an open operating system which has programming tools readily available to any user either directly from Palm™ or other commercial sources that allow a user to create various programs, either directly on the Palm™ device, or on a host computer that can be downloaded to the Palm™, and executed on demand. A variety of software applications are available for the user from multiple sources (i.e., freeware, shareware, commercial sources).
Although the Palm VII™ or VIIx™ may be imported separately, the devices also are imported as a set which includes: a Palm VII™ or VIIx™ handheld electronic device, a HotSync® cradle, Palm Desktop organizer software, handbook, getting started guide, batteries, DB-25 adapter and a protective carrying case.
ISSUE:
Are the Palm VII™ and VIIx™ handheld electronic devices properly classified under heading 8470, HTSUS, as pocket-size data recording, reproducing and displaying machines with calculating functions; heading 8471, HTSUS, as hand-held computers; or under heading 8525, HTSUS, as transmission apparatus?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRIs”). 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 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.
The HTSUS provisions under consideration are as follows:
Calculator machines and pocket-size data recording, reproducing and displaying machines with calculating functions; accounting machines, postage-franking machines, ticket issuing machines and similar machines incorporating a calculating device; cash registers:
Electronic calculators capable of operation without an external source of electric power and pocket-size data recording, reproducing and displaying machines with calculating functions
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:
8471.30.00 Portable digital automatic data processing machines weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display
Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of chapter 37:
Other:
For reproducing representations of instructions, data, sound and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine; proprietary format recorded discs.
Other:
Other.
8525 Transmission apparatus for radiotelephony, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras or other video camera recorders:
You state in your letter that the Palm VII™ series of electronic devices are digital devices that are classifiable as automatic data processing machines under heading 8471, HTSUS. Automatic data processing (“ADP”) machines are commonly and commercially known as computers. Note 5(A) to chapter 84, HTSUS, provides a definition for the term “automatic data processing machines” for the purposes of heading 8471. The definition is expressed in terms of the abilities an ADP machine possesses. Chapter 84, Note 5 (A)(a) states that a digital machine must be capable of:
storing the processing program or programs and at least the data immediately necessary for execution of the program;
being freely programmed in accordance with the requirements of the user;
performing arithmetical computations specified by the user; and
executing, without human intervention, a processing program which requires them to modify their execution, by logical decisions during the processing run.
We take the arguments you make in your submission into consideration when making a determination as to whether or not the Palm VII™ series meets the requirements of Note 5(A) of chapter 84.
Note 5(A)(a)(1): Storing the Processing Program or Programs and at Least the Data Immediately Necessary for Execution of the Program
The Palm VII™ and VIIx™ satisfy Note 5(A)(a)(1) in that they are capable of storing the processing program or programs and at least the data immediately necessary for the execution of programs in their RAM and ROM by (1) incorporating an operating system that controls the running of other programs, and (2) containing sufficient memory to store and execute standard applications such as the date book, memo pad and calculator, as well as other programs which may be added or created by the user.
Note 5(A)(a)(2): Being Freely Programmed in Accordance with the Requirements of the User
Customs has previously dealt with the issue of whether an ADP machine is capable of being freely programmed in accordance with the requirements of the user, or “freely programmable.” In HQ 952862, dated November 1, 1994, Customs considered the classification of systems for radio frequency collection and transmission of data for industrial control. In that ruling, Customs determined that the data collection devices, while having some processing capability, were not “freely programmable.” In determining whether a particular machine was “freely programmable,” Customs examined the definition of the terms “computer” and “personal computer.” HQ 952862 indicated that:
A computer, which is freely programmable, is a "[g]eneral-purpose machine that processes data according to a set of instructions that are stored internally either temporarily or permanently." A. Freedman, The Computer Glossary, Sixth Edition, pg. 95 (1993). A personal computer "is functionally similar to larger computers, but serves only one user. It is used at home and in the office for almost all applications traditionally performed on larger computers." Computer Glossary (1993), pg. 400. Personal Computers "are typically used for applications, such as word processing, spreadsheets, database management and various graphics-based programs, such as computer-aided design (CAD) and desktop publishing. They are also used to handle traditional business applications, such as invoicing, payroll and general ledger. At home, personal computers are primarily used for games, education and word processing." A. Freedman, The Computer Glossary, Fourth Edition, pg. 524 (1989). Because they can perform any of the above-listed applications, personal computers are considered to be "freely programmable."
Customs notes the rapid evolution of the modern day digital computer and its expansion in capabilities over the years. The so-called “first generation” of computers was characterized by the use of wired circuits containing vacuum tubes and used punched cards as the main storage medium. These machines, such as Colossus (designed to decode German messages during World War II), the Harvard Mark I and ENIAC (“Electronic Numerator, Integrator, Analyzer, and Computer”; some sources have “and Calculator”) were enormous in size and utilized made- to-order operating instructions to accomplish specific tasks. Each computer had a different binary-coded program, called a “machine language,” that instructed it on how to operate. Changing the programming of the computer required an operator to change the wiring of that machine, often by changing a plug board on the side of a computer.
“Second generation” computers were defined by the replacement of vacuum tubes with solid-state components. The invention of the transistor allowed computers to become smaller, faster and more reliable. By 1965, most businesses routinely used second generation computers to process financial information. Using magnetic-core memory, these computers were able to store programs. Because programs were now contained inside a computer’s memory, the computer could run a specific function, and then quickly change to perform another function, without the need to physically change the machine. More sophisticated programming languages, such as FORTRAN (Formula Translator) and COBOL (Common Business-Oriented Language) replaced the binary code of the computers predecessors, and new careers such as computer programmer and analyst were created.
“Third generation” computers benefited from the invention of integrated circuits and semiconductors. These are also the first computers to utilize an operating system that would allow the computer to run a variety of programs at once with a central program that monitored and coordinated the computers’ memory.
“Fourth generation” computers became smaller and more affordable. By the mid-1970’s, computers were brought to the general public by companies such as Commodore, Radio Shack and Apple. IBM introduced the personal computer (“PC”) in the early 1980’s. These computers became more powerful and entire software industries were created to provide programs that utilized the processing functions of these machines.
Now, the “fifth generation” of computers is in its infancy, and is characterized by the utilization of superconductors and parallel processing, which allows many CPU’s to work as one.
Throughout this span, the ability of the computer to be freely programmed in accordance with the requirements of the user has become simpler. From machines that were dedicated to a single purpose (such as Colossus) to having the ability to switch between programs to serve different functions, computers have become more adaptable, and thus become freely programmable.
Customs believes that a freely programmable ADP machine is one that applications can be written for, does not impose artificial limitations upon such applications, and will accept new applications that allow the user to manipulate the data as deemed necessary by the user.
The Palm VII™ series handhelds satisfy Note 5(A)(a)(2) in that they are freely programmed in accordance with the requirements of the user in several ways:
Directly on the Palm VII™ series: various commercial development tools can be used to program the Palm VII™ series devices without any host computer, such as Pocket C, Quatrus Forth and LispMe. Programs are written by the user in a third generation language on the Palm memo pad and then compiled using the computer. The compiled program is then stored to be executed on demand on the device.
With a host computer to generate a generic application: a generic program can be developed in a host computer using the appropriate high-level development environment (e.g., Java). The program is checked and encoded in a generic way. It can then be downloaded to the Palm VII™ series via the Hotsync, where it is stored and retained. When loaded, it can be executed on demand on top of the related runtime engine to complete the task required by the user.
With a host computer to generate a native application: a Palm specific program can be developed for the Palm VII™ series handheld device with a host computer (with Windows, Macintosh, Unix, etc. OS) using the appropriate development tools and third generation language (e.g., Code Warrior C, C). The program is compiled in machine language, which the computer can read, and downloaded to the Palm, where it is stored and retained. The program can then be executed on demand.
In analyzing whether Note 5(A)(a)(2) is satisfied, we also considered the following pertinent factors:
the Palm Operating System is an open operating system;
programming tools are readily available to any user either directly from Palm or from other commercial sources;
the fact that hundreds of software applications are currently available for the Palm OS through a variety of vendors who distribute them either as freeware, shareware, or commercial applications. These range in function and utility from business (such as code-scanning inventory trackers) and educational (such as grade-calculating spreadsheets) programs to engineering (such as car-engine diagnostics) and other programs.
Note 5(A)(a)(3): Performing Arithmetical Computations Specified by the User
The Palm VII™ series handhelds satisfy Note 5(A)(a)(3) in that the Palm VII™ series each contain a Motorola microprocessor which can perform complex arithmetic computations. For example, using a computer programming language, the user may create a program which instructs the device to add simple integers together, or compute more complex arithmetical instructions.
Note 5(A)(a)(4): Executing, Without Human Intervention, a Processing Program Which Requires Them to Modify Their Execution, by Logical Decision During the Processing Run
The Palm VII™ series handhelds appear to satisfy Note 5(A)(a)(4) in that they can execute, without human intervention a processing program which requires the devices to modify their execution, by logical decision during a processing run. It is possible to write a program using the aforementioned applications that contain logic instructions. Using logical operators such as “and,” “or,” “not” and using Pocket C, one can compile and then execute the program without human intervention.
After careful consideration and examination of your arguments as to the features, functions and capabilities of the Palm VII™ series, for the preceding reasons, we have come to the conclusion that the Palm VII™ and VIIx™ meet the requirements set forth in Note 5(A)(a) of chapter 84.
The Palm VII™ and VIIx™ are handheld electronic devices combined with a two-way wireless radio. As such, they are composite machines under Section XVI, Note 3, HTSUS, which provides as follows:
Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted 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.
As noted above, the articles consist of a handheld electronic device that is coupled with a two-way wireless transmitter/receiver with its own integrated antenna. The wireless radio component of the Palm VII series allows two-way wireless connections to the Internet. The articles at issue here principally function as handheld electronic devices whose capabilities are enhanced by the addition of wireless and infrared connectivity to enable the transmission and reception of data. Even without the wireless capabilities, the Palm VII series would still be able to function as organizers, address books, or run various other utility programs available for the devices. For this reason, we find that by the terms of Note 3 to Section XVI, the articles do not fall to be classified in heading 8525.
Through application of GRI 1, utilizing the terms of the headings and relative section and chapter notes, Customs finds that the Palm VII™ series handheld electronic devices meet the terms of heading 8471, HTSUS. For the foregoing reasons, the Palm VII™ series handheld electronic devices are classified under subheading 8471.30.00, HTSUS, which provides for: “[a]utomatic 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: Portable digital automatic data processing machines weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display.”
Because the Palm VII™ series of handheld electronic computers are defined for tariff purposes as ADP machines of heading 8471, HTSUS, they are precluded from classification under heading 8470, HTSUS. The ENs to heading 8470 indicate that the heading does not cover: (a) data processing machines of heading 84.71 (emphasis original, page 1401).
Palm Retail Sets
As indicated above, the Palm VII™ and VIIx™ could be imported both separately in bulk or as retail sets packaged with additional components such as a HotSync cradle, Palm Desktop Software, a handbook and guide, two AAA batteries, a DB-25 adapter and a protective carrying case. If imported as packaged sets, the goods are ready for retail sale without the need for repackaging.
The classification of goods put up in sets for retail sale is governed by GRI 3(b). GRI 3(b) provides, in relevant part, that goods put up for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. According to the ENs for GRI 3(b), “goods put up in sets for retail sale” refers to goods which:
consist of at least two different articles which are, prima facie, classifiable in different headings;
consist of products or articles put up together to meet a particular need or carry out a specific activity; and
are put up in a manner suitable for sale directly to users without repacking.
As indicated in your letter, the Palm series handheld retail sets meet all three of the ENs criteria for “goods put up in sets for retail sale.” First, the Palm VII™ handheld retail sets consist of numerous articles, which, if imported separately, would be classifiable in different headings. Second, all of the components placed in the Palm VII™ handhelds retail sets are put up together to allow the Palm VII™ handhelds to function as portable computers. Third, in their imported condition, the Palm VII™ handheld retail sets are packaged in a manner suitable for retail sale to the ultimate purchaser, without the need for further repackaging. Accordingly, pursuant to GRI 3(b), the Palm VII™ series handheld retail sets are properly classified, as are single units, under subheading 8471.30.00, HTSUS, which is the subheading under which the Palm VII™ series handhelds, which provide the retail sets with their essential character, are classified.
However, Chapter 85, Note 6 states that, “[r]ecords, tapes and other media of heading 8523 or 8524 remain classified in those headings, whether or not they are entered with the apparatus for which they are intended.” Thus, the applicable subheading for the Palm Desktop organizer software on a CD-ROM will be 8524.39.40, HTSUS, which provides for “[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena…[d]iscs for laser reading systems: [o]ther: [f]or reproducing representations of instructions, data, sound and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine…”
The applicable subheading for the Palm Desktop organizer software on diskettes will be 8524.99.40, HTSUS, which provides for “[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena…[o]ther: [o]ther: [o]ther.”
HOLDING:
For the reasons stated above, the Palm VII™ and VIIx™ handheld computers, when imported separately, are to be classified under subheading 8471.30.00, HTSUS, which provides for “[a]utomatic 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: Portable digital automatic data processing machines weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display.”
The applicable classification for the Palm VII™ series retail set will also be subheading 8471.30.00, HTSUS.
The applicable subheading for the Palm Desktop organizer software on a CD-ROM will be 8524.39.40, HTSUS, which provides for “[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena…[d]iscs for laser reading systems: [o]ther: [f]or reproducing representations of instructions, data, sound and image, recorded in a machine readable binary form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine…”
The applicable subheading for the Palm Desktop organizer software on diskettes will be 8524.99.40, HTSUS, which provides for “[r]ecords, tapes and other recorded media for sound or other similarly recorded phenomena…[o]ther: [o]ther: [o]ther.”
EFFECT ON OTHER RULINGS:
NY F89667, dated August 10, 2000, is revoked. In accordance with 19 U.S.C. 1625 (c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
John Durant, Director
Commercial Rulings Division