CLA-2-OT:RR:CTF:TCM H004676 TNA
Tariff No.: 8537.20.00
Port of Houston
U.S. Customs and Border Protection
2350 N. Sam Houston Pkwy E. #1000
Houston, TX 77032-3100
Attn: Kathy Coffman, SIS
Re: Application for Further Review Protest No. 5301-06-100353; Mach 2 System
Dear Port Director:
The following is our decision on the application for further review (“AFR”) of Protest No. 5301-06-100353, filed by counsel on behalf of ABB, Inc (“ABB”), protesting U.S. Customs and Border Protection’s (“CBP”) classification of the Mach 2 System, under the Harmonized Tariff Schedule of the United States (HTSUS). In coming to our conclusion, we have considered arguments Protestant presented during a teleconference to members of my staff on September 2, 2010, as well as a supplemental submission made on September 7, 2010.
A Mach 2 system is composed of several industrial personal computers (“PCs”) and various input/output boards contained in a cabinet and workstations. The Mach 2 performs multiple computer-based tasks, including control, protection, monitoring, regulation, event recording, transient fault recording, alarm handling and report generating in high voltage electrical systems. The functions are all software driven and are built around Pentium dual-processors in industrial PCs, human interface workstations and high performance digital signal processors which convert analog signals to digital signals. The PCs in the system are interconnected by computer busses and a local area network.
Since submission of the Protest, the protestant has provided CBP with a packing list which describes more fully the contents of one of the packages (6US1551 (+SB.1, DC distribution A)). As imported the system consisted of the following items: VCU Cubicle, MACH Cubicle, HMI Cubicle, RTU Cubicle, +RA.1 Relay cubicle, +RB.1 Relay cubicle, +SB.1, DC distribution A, +SA.1, AC Distribution, and Aux. transformer. In addition the 6US1551 package contained +SB.2, DC distribution B, SVC.WBI – TI5.J, SVC.CF31-T11/T14.J, SVC.CF32-T11/T14.J, SVC.CF32-T11/T14.J, SVC.TCR21-T11.J, power inverter, VCU power supply, fan power supply, Lan cable for maint PC, terminal blocks, end sections, terminal strip marker, marking strips, DC/DC converter and bracket for junction box.
The merchandise at issue is a complete Mach 2 System. The Mach 2 was imported for use with a Static VAR Compensation (SVC) project, which involves the construction of three SVC stations. The protestant explains the SVC and the use of the Mach 2 with an SVC as follows:
A[n] SVC is an electrical device for providing fast-acting reactive power compensation on high-voltage electricity transmission networks. Typically an SVC is comprised of a bank of individually switched capacitors in conjunction with thyristor-controlled reactors and harmonic filters. By means of phase angle modulation switched by the thyristors, the reactor may be variably switched into the circuit to provide a continuously variable Var (voltage-ampere, reactive) injection or absorption to the electrical network. Thus, the SVC creates the required dynamic range- inductive and capacitive- to provide rapid reactive power and voltage modulation during network disturbances that conventional slow-switched shunt capacitors and reactors are unable to provide. The Mach 2 system, along other things, controls the firing of the thyristors.
Each of the three SVCs is controlled by a microprocessor based control system, the Mach 2, which is built around an industrial computer with add-in circuit boards and input/output racks connected via standard type field buses. Dedicated voltage and current transformers provide the control system with information of the network condition. The control system provides facilities for SVC control either from an operator workstation or remotely via a conventional RTU/SCUDA system.
Exhibit B to the protestant’s submission, a brochure entitled SVC Static Var Compensator, describes an SVC, on page 3, as follows:
An SVC can improve power system transmission and distribution performance in a number of ways. Installing an SVC at one or more suitable points in the network can increase transfer capability and reduce losses while maintaining a smooth voltage profile under different network conditions. The dynamic stability of the grid can also be improved, and active power oscillations mitigated.
Exhibit B also includes a brochure entitled SVCs for load balancing and trackside voltage control, which on page 4, describes the function of the control system as follows:
The control system, MACH 2, is based on common PC technology but adapted to meet the special requirements for use in an electric power substation environment. All communication with the SVC is via a terminal screen. A traditional mimic panel is also provided in the building for redundancy. Operation and supervision of the system is normally taken care of from a remote control room with which the control system communicates.
The main objective of the control system is to convert the single-phase traction load into a symmetrical three-phase load. It is also designed to keep the 33 kV bus voltage close to a voltage set point. The voltage control system used is a closed loop system.
The subject merchandise was entered on March 29, 2006 and liquidated on May 19, 2006 in separate tariff headings. The AC distribution panel board and dc distribution panel board were entered and liquidated under heading 8537, HTSUS, as “boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity.” Five models of junction boxes were classified in heading 8536, HTSUS, as “electrical apparatus for switching or protecting electrical circuits, or for making connections to or in electrical circuits…for a voltage not exceeding 1,000V.” The RA.1 Relay protection cubicle, RB.1 Relay protection cubicle, MACH 2 control cubicle, and HM1, VCU, and RTU cubicle were entered under heading 8741, HTSUS, as “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.” They were liquidated under heading 8537, HTSUS. This protest was filed on August 17, 2006, asserting that the merchandise should be classified in heading 8471, HTSUS, as automatic data processing machines and units thereof.
Whether the Mach 2 System is classified under heading 8471, HTSUS, as an automatic data processing machine and units thereof; under heading 8536, HTSUS, as electrical apparatus; or under heading 8537, HTSUS, as boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, HTSUS, for electric control or the distribution of electricity?
LAW AND ANALYSIS:
Initially, we note that the matter is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. This protest was timely filed within 180 days of the liquidation of the subject entries, for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006))).
Further Review is properly accorded to the protest pursuant to 19 C.F.R. § 174.24(a) and (b) because the decision against which the protest was filed is alleged to be inconsistent with a decision made at another port with respect to the same merchandise and is alleged to involve questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee or by the Customs courts. Specifically, two other ports have liquidated identical merchandise in accordance with ABB’s claimed classification, and the Mach 2 system has not been previously ruled upon by CBP.
Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, 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 2 through 6 may then be applied in order.
The 2006 HTSUS headings under consideration are as follows:
8471 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:
8537 Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517.
Heading 8471, HTSUS, is governed by the terms of Note 5 to Chapter 84, HTSUS, which provides, in relevant part:
(A) For the purposes of heading 8471, the expression "automatic data processing machines" means machines capable of:
(i) Storing the processing program or programs and at least the data immediately necessary for the execution of the program;
(ii) Being freely programmed in accordance with the requirements of the user;
(iii) Performing arithmetical computations specified by the user; and
(iv) Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run.
(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units…
(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in Note 5(C) above:…
(ii) 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);
(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.
Section XVI, Note 4, HTSUS, states, in relevant part:
Where a machine (including a combination of machines) 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.
In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs), although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The ENs to heading 8537, HTSUS, state, in pertinent part, the following:
These consist of an assembly of apparatus of the kind referred to in the two preceding headings (e.g., switches and fuses) on a board, panel, console, etc., or mounted in a cabinet, desk, etc. They usually also incorporate meters, and sometimes also subsidiary apparatus such as transformers, valves, voltage regulators, rheostats or luminous circuit diagrams.
The goods of this heading vary from small switchboards with only a few switches, fuses, etc. (e.g., for lighting installations) to complex control panels for machine-tools, rolling mills, power stations, radio stations, etc., including assemblies of several of the articles cited in the text of this heading.
The heading also covers:
Numerical control panels with built-in automatic data processing machine, which are generally used to control machine-tools.
Programmed switchboards to control apparatus; these permit variations in the choice of operations to be followed. They are normally used in domestic electrical appliances, such as washing machines and dish washers.
“Programmable controllers” which are digital apparatus using a programmable memory for the storage of instructions for implementing specific functions such as logic, sequencing, timing, counting and arithmetic, to control, through digital or analog input/output modules, various types of machines.
In EN 84.71(D) (2002 ENs), it is explained that:
An apparatus can only be classified in this heading as a unit of an automatic data processing system if it:
(i) Performs a data processing function;
(ii) Meets the criteria set out in Note 5 (B) to this Chapter, including the introductory paragraph of that Note; and
(iii) Is not excluded by the provisions of Note 5 (E) to this Chapter.
Protestant argues that the instant merchandise is classified in heading 8471, HTSUS, as a unit of an ADP machine because it meets the criteria set out in notes 5(A) and (B) to Chapter 84, HTSUS. However, Protestant fails to recognize the exclusion in Note 5(E) to Chapter 84, HTSUS. The Mach 2 is “designed to keep the 33kV bus voltage close to a voltage set point” (controls the firing of the thyristors). Thus it is designed “for electric control,” a specific function other than data processing. As a result, we find that the Mach 2 is excluded from classification in heading 8471, HTSUS, in accordance with Note 5(E), HTSUS.
In the supplemental petition following the teleconference with members of our staff, counsel cited to Headquarters Ruling (HQ) W967696, dated June 1, 2007, for the proposition that the Mach-2 system’s I/O boards satisfy the requirements of Note 5(E). HQ W967696 classified a Dell keyboard, video, and mouse (“KVM”) Console Switch in heading 8471, HTSUS. These KVM switches
were rack mounted network switches for switching between ADP machines and other network servers, which were computers. They allowed a system administrator to view and control several servers through the use of one or two monitors, keyboards and mouse.
In the present case, counsel states that the I/O boards are devices through which signals are sent to and from the Mach-2’s computers, and that as a result, they perform the same function as the KVM switches of HQ W967696, thereby allowing classification of the Mach-2 system in heading 8471, HTSUS. We disagree. The KVC switches at issue in HQ W967696 utilized a combination of solid state switching and software to switch the input signals from various servers that are connected to the switch and switched between ports of other servers. They did not control machines performing a specific function other than data processing. By contrast, the function of the subject Mach 2 system is electric control and distribution of electricity to a power distribution grid. The Mach-2 system’s I/O boards thus serve a different function, and can therefore be distinguished from the KVM switches of HQ W967696. The I/O boards that are incorporated into this system are not specifically provided for elsewhere in the tariff, except in heading 8537, HTSUS, which provides for electrical apparatus that utilize digital apparatus for implementing specific functions through digital or analog input/output modules of various types of machines. See EN 85.37.
Furthermore, the Mach 2 system includes multiple SVC devices and relay cubicles, and “input/output boards” (as shown in Exhibit E to the protest) and those are clearly “boards, panels, consoles, desks, cabinets and other bases.” In addition, in order to work together, the units must have electrical buses and connectors in order to connect with one another. Indeed, the electrical bus and connectors are shown in Exhibit I to the protest, an exhibit which consists of the Mach 2 system and its input/output boards and the Mach 2 circuit buyer’s guide. Electrical buses and connectors are articles of headings 8535 or 8536, HTSUS. The Mach 2 system is therefore “equipped with two or more apparatus of heading 8535 or 8536.”
The Mach 2 system consists of separate components contributing together to the function of controlling electricity. While the Mach 2 may perform other tasks such as monitoring, regulation, event recording, transient fault recording, alarm handling and report generating in high voltage electrical systems, these are subsidiary to the function of electrical control. Hence, the Mach 2 is described by the terms of heading 8537, HTSUS, as “boards, panels, consoles, desks, cabinets and other bases equipped with two or more apparatus of heading 8535 or 8536,” for the control or the distribution of electricity.
ABB argues that the Mach 2 is not described by the terms of heading 8537, HTSUS, by virtue of the fact that 1) all of its functions are performed by software running on industrial computers, 2) it is not on a unitary piece of hardware, 3) it does not have a programmable controller component as part of the system, and 4) in addition to its control functions, it performs significant non-control tasks and functions.
There is no limitation in heading 8537, HTSUS, or EN 85.37, that functions performed by merchandise covered in the heading cannot be performed by software running on industrial computers, or any other type of computers. In HQ 967519, dated July 11, 2006, CBP classified a system which included a computer with a Windows NT workstation in heading 8537, HTSUS. In addition, EN 85.37 provides that the heading includes control panels with built-in data processing machines, or in other words, “computers.” The fact that some devices of heading 8537, HTSUS, do not include an ADP system does not mean that a device that incorporates one or more ADP systems cannot be classified in heading 8537, HTSUS.
ABB also tries to distinguish between merchandise of heading 8537, HTSUS, and PC-based (grounded solely in software) control systems. However, literature that ABB submitted, such as that provided in Exhibit N to the Protest submission, describes the PC-based systems as “controllers.” The Mach 2 appears to be an advanced version of a programmable controller of heading 8537, HTSUS, and the ENs thereto.
We agree with ABB that the subject merchandise is one system. The ENs to 85.37 indicate that articles of that heading include “assemblies” of several articles. The Oxford English Dictionary defines an “assembly” as “[t]he action or method of assembling a machine or composite article; the parts so assembled.” The Merriam-Webster Online dictionary defines an “assembly” as “the fitting together of manufactured parts into a complete machine, structure, or unit of a machine b: a collection of parts so assembled.”
ABB cites to several CBP rulings that have classified similar systems in heading 8471, HTSUS. The merchandise in each of these rulings, however, is distinguishable from the subject merchandise. The video network system at issue in HQ 088464, dated September 11, 1991, and the digital processing unit at issue in NY 857419, dated October 25, 1990, only performed data processing functions, and did not perform any other function. Furthermore, the merchandise at issue in NY I87029, dated October 31, 2002, and NY 877547, dated August 31, 1992 was not a whole system; to the contrary, the merchandise in these rulings consisted of components that could be incorporated into complete systems. By contrast, the subject Mach 2 system is imported as a complete system. The merchandise at issue in HQ 085666, dated November 8, 1989, HQ 954059, dated July 16, 1993, NY 880137, dated November16, 1992, and HQ 987902, dated January 14, 1991, all perform specific functions other than data processing. Any control function of the merchandise in these rulings is that of the merchandise’s ADP units.
Counsel also cites to Whirlpool Corporation v. United States, 31 C.I.T. 1147 (CIT 2007) in support of its argument that the Mach-2 system cannot be classified in heading 8537, HTSUS, because any individual components of heading 8536 or 8537, HTSUS, that I/O boards contained would have lost their identity as individual components when they were combined with other parts to make I/O boards and other boards. However, the court’s exclusion of the merchandise in Whirlpool from headings 8536 and 8537, HTSUS, was by virtue of the relevant legal notes. Id. at 1154. The court did not reach the question of whether the merchandise was described by the terms of those headings, and the question of whether the components lost their identity when they were incorporated into a system was not an issue in the case. As a result, we find that Whirlpool is inapplicable to the present case.
Lastly, in the September 2 teleconference, ABB argued that the subject merchandise could not be classified in heading 8537, HTSUS, because it does not contain individual components of headings 8535 or 8536, HTSUS, which are required for the subject system as a whole to be classified in heading 8537, HTSUS. This statement contradicts the description of the Mach-2 System provided in counsel’s supplemental petition, which indicates that both bypass switches and circuit breakers, for example, are components of the Mach-2. Invoices provided at the time of importation show that ABB imported an entire Mach-2 system, which contains such components as AC and DC panel boards, various junction boxes, relay protection cubicles, and various other cubicles such as an HMI cubicle and a VCU cubicle. Diagrams provided in ABB’s original submission show that the Mach-2 contains two breaker controls and two disconnector interlocking components. See Counsel’s Exhibit I, Diagram 3.1.
Interlock switches, also called door-interlock switch or electrical interlock, are door or lid-operated switches connected in series with the power switch of a piece of equipment. The interlock causes power to be removed from internal circuits whenever the door is opened, the lid lifted, or the case removed. This minimizes the chance for electric shock to occur to service personnel. See The Illustrated Dictionary of Electronics, 8th Edition. Interlocking is the forcing of a voltage of one frequency to be in step with a voltage of another frequency. Interlocking circuit is a circuit in which a given action cannot occur until after one or more other actions have taken place. The interlocking action is generally obtained through the use of relays. See Modern Dictionary of Electronics, 7th Edition. In the break controls, “breaker” is short for “circuit breaker,” which is an automatic device that, under abnormal conditions, will open a current-carrying circuit without damaging itself (unlike a fuse, for example, which must be replaced when it blows). A circuit breaker is a device for interrupting a circuit under normal or abnormal conditions by means of separable contacts. It opens a circuit automatically when the current exceeds a predetermined value and can be reset by operating a lever or by other means. A bypass is a shunt (parallel) path around one or more elements of a circuit. See Modern Dictionary of Electronics, 7th Edition. Bypass switches and circuit breakers are classified under headings 8535 and 8536, HTSUS. See, e.g., EN 85.35; EN 85.36. The inclusion of these components in the Mach-2 system further supports the system’s classification in heading 8537, HTSUS.
On the basis of the foregoing, we find that the Mach 2 system is classified in heading 8537, HTSUS, specifically subheading 8537.20.00, HTSUS, which provides for “[b]oards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517: For a voltage exceeding 1,000 V.” We note that the SVC units listed on the packing list for 6US1551 are indicated as 69kV, which is equal to 69,000 volts.
By application of GRI 1, and Chapter 84, Note 5(E), the subject Mach 2 System is classified in heading 8537, HTSUS. It is specifically provided for under subheading 8537.20.00, HTSUS, which provides for “[b]oards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517: For a voltage exceeding 1,000 V… Other.” The column one general rate of duty at the time of entry was 2.7%. 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.usits.gov/tata/hts/.
You are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Myles B. Harmon, Director
Commercial and Trade Facilitation Division