CLA-2 OT:RR:CTF:TCM W967550 HkP
George R. Tuttle, Esq.
Law Offices of George R. Tuttle, PC
One Embarcadero Center, Suite 730
San Francisco, CA 94111
RE: Central Gateway Module N93; NY L80751 Affirmed
Dear Mr. Tuttle:
This is in response to your letter, dated January 27, 2005, on behalf of Conti TEMIC Microelectric GmbH, concerning the classification of an electrical routing device under the Harmonized Tariff Schedule of the United States (“HTSUS”). Specifically, you requested reconsideration of New York Ruling Letter (“NY”) L80751, dated December 1, 2004, in which the National Commodity Specialist Division of U.S. Customs and Border Protection (CBP) classified the Central Gateway Module N93 (“N93”) in subheading 8543.89.9695 (now, 8543.70.9650), HTSUSA, as an electric machine or apparatus, having individual functions, not specified or included elsewhere in Chapter 85, “other”. Further to one of several telephone discussions of the issues in this case with members of my staff, you provided technical information and specifications for the Central Gateway N93 in a letter dated September 19, 2006. In addition, after a teleconference on October 29, 2007, you provided information relating to the principal function of the N93.
You contend that the N93 is provided for in heading 8517, HTSUS, as other apparatus for the transmission or reception of voice, images or other data. We have reviewed NY L80751 and find that the underlying classification is correct, although a misstatement was made regarding the scope of heading 8517.
FACTS:
The N93 is an onboard module consisting of a covered assembly board containing a microprocessor, random access memory (RAM), read-only memory (ROM), flash memory and embedded software. The N93 is an electrical routing device for transmitting electronic data between various Control Area Networks (CANs) or data-buses located on certain Mercedes-Benz motor vehicles for the purpose of performing
various testing, measuring, monitoring and control applications between systems on the vehicle. An example of the N93’s function is in braking applications where the N93 routes sensor data from the vehicle’s antilock braking system network to the Sensortronic Brake System (SBS) network. The SBS’ microcontroller calculates the ideal braking pressure for each wheel depending on wheel speed, steering wheel angle, transverse acceleration and rotary motion.
In addition, the N93 contains maintenance programs that make repair calculations based on real-time data obtained from the automotive network and routes “alerts” to the driver that maintenance is required. It also gathers and stores data from the sensors in the vehicle and from servicing technicians to maintain a log of automotive use and maintenance actions which it then routes to external diagnostic computers. The N93 is also said to perform certain ignition version-coding functions which you do not describe. You refer to these as secondary or subsidiary functions that do not obscure the primary function of the N93, which is to transmit data electrically between two points.
ISSUE:
What is the correct classification of the N93 Central Gateway Module?
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 2 through 6 may then be applied in order.
In NY L80751, in response to the suggested classification of the Central Gateway Module in subheading 8517.50, HTSUS, CBP stated:
Although the Central Gateway Module is an electrical apparatus, it is designed for specific use with an individual vehicle’s Central Area Networks (CANs) and its purpose is to communicate, route and deliver electronic data solely between those in-vehicle electronic networks. Since the transmission of the Central Gateway module’s data is limited to the confines of a single vehicle, it is not classifiable within Heading 8517 as that Heading is intended to provide for “long haul transmission” of data.
Pursuant to title 19 United States Code, Section 3005, the Harmonized Tariff Schedule of the United States was amended to reflect changes recommended by the World Customs Organization. The proclaimed changes are effective for goods entered or withdrawn from warehouse for consumption on or after February 3, 2007. See Presidential Proclamation 8097, 72 FR 453, Volume 72, No. 2 (January 4, 2007). The statement “heading 8517 … is intended to provide for long haul transmission of data” made in NY L80751 was an incorrect remark. That statement is now irrelevant due to the express language of the 2007 text of heading 8517.
The goods of the subheading under which the subject module was classified in NY L80751, 8543.89.9695, HTSUS (other electrical machines and apparatus, having individual functions, not specified or included elsewhere in chapter 85) were transferred, in relevant part, to subheading 8543.70.9650 in the 2007 HTSUS, effective February 3, 2007. In addition, the goods of the subheading that you believe to be the correct classification, subheading 8517.50, HTSUS, were transferred, in relevant part, to subheading 8517.62, HTSUS (2007).
The 2007 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:
* * *
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):
* * *
8517.62.00 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus: …..
* * *
8517.62.0050 Other …..
8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in [chapter 85]; parts thereof:
* * *
8543.70 Other machines and apparatus:
* * *
Other:
* * *
Other:
* * *
8543.70.96 Other:
* * *
8543.70.9650 Other …..
Chapter 85 is found in Section XVI of the HTSUS. Note 3 to Section XVI provides, in part, that unless the context otherwise requires, 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 which performs the principal function.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the HTSUS at the international level. While not 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.
Heading 8517 covers electrical apparatus for the transmission or reception of data between two points, regardless of the type of signal (i.e., analog or digital) or distance transmitted. EN 85.17 explains that heading 8517:
[C]overs 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 electromagnetic 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.
Based on the information provided, the N93 performs two functions. The first is the routing of information between bus systems within a motor vehicle to permit an exchange of data between individual control units in the vehicle. This function is described by heading 8517. The second is maintaining a log of maintenance actions, comparing data received with preprogrammed data in its memory and activating a warning light or sending a signal to another device. This second function is unrelated to goods of heading 8517 but involves an electrical phenomenon appropriate to apparatus of heading 8543.
You maintain that the N93 meets the terms of heading 8517 because it transmits data across a digital line system. It is electrical apparatus in a digital line system based on the modulation of an electrical carrier-current or of a light beam by analog or
digital signals. It transmits digital data between two points over dedicated lines or, in this case, from one point to another point between separate data networks. You compare the N93 to local area network (LAN) equipment, which is essentially apparatus that enables users to send data between multiple points, usually host computers and terminals. See HQ 963250, dated July 23, 2001, and HQ 964610, dated February 4, 2002. You also cite rulings which classify “gateway” devices in provisions of heading 8517. These devices create a high-speed Local Area Network (LAN) that enables secure access and interaction via the Internet between remote locations. See NY I83651, dated July 5, 2002, and NY I84873, dated August 19, 2002. Finally, and more significantly, you note that CBP classifies network equipment that performs another significant function or functions as electrical apparatus for line telegraphy of heading 8517, referencing HQ 962968, dated October 26, 2000, and HQ 086196, dated April 2, 1990, cited therein. These rulings, as well as NY I88159, dated November 27, 2002, classified encryption devices for encoding and decoding data while it is being transmitted over digital line systems in subheading 8517.80.2000, HTSUSA. We find that these encryption devices are distinguishable from the N93 because they are designed to encode, decode or otherwise secure information against unauthorized access over private and public networks but perform no actual transmission function themselves.
In addition, you contend that the principal function of the N93 is for the transmission or reception of data, as indicated by its physical characteristics, its channels of trade and environment of sale, the use of the module and the recognition in the trade of this use. We note that these are some of the factors usually considered under U.S. Additional Rule of Interpretation 1(a) when determining the “principal use” of the class or kind of good to which an imported good belongs. Generally, the courts have provided several factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics, (2) expectation of the ultimate purchaser, (3) channels of trade, environment of sale (accompanying accessories, manner of advertisement and display), (4) use in the same manner as merchandise which defines the class, (5) economic practicality of so using the import, and (6) recognition in the trade of this use. See Lennox Collections v. United States, 20 CIT 194, 196 (1996). See also United States v. Carborundum Co., 63 CCPA 98, 102, 536 F.2d 373, 377 (1976), cert denied, 429 U.S. 979 (1976); Kraft, Inc. v. United States, 16 CIT 483, 489 (1992); and G. Heileman Brewing Co. v. United States, 14 CIT 614, 620 (1990). Although indicative but not conclusive, CBP nonetheless finds that the guidance set forth by the courts to determine principal use may be helpful in establishing the principal function of a multi-function machine. CBP adopted a similar approach in HQ W968223, dated January 12, 2007, and HQ 966270, dated June 3, 2003.
In support of your assertion that the principal function of the N93 is the transmission of data, you state the following:
The physical characteristics of the modules primarily involve the transmission of data between the various sensors in the automobile, including data to the driver or maintenance personnel.
The ultimate purchaser of a module expects that it transmits data.
The known channels of trade are for sale to the automotive industry as a bus for the transmission of data.
The environment of sale in which the N93 is advertised and displayed for the automobile industry.
The principal use of the module is for the transmission of data. Other functions are secondary to these transmission functions and cannot exist unless data is transmitted or received.
In your opinion, the so-called secondary functions of the N93, previously described, occur intermittently and are subsidiary to the N93’s primary function as a data gateway described in heading 8517. However, it is these subsidiary functions that are directly relevant to the classification of the N93 and which must be examined. The N93 gathers and stores data from the vehicle’s sensors in order to maintain a maintenance log the data from which is later routed to external diagnostic computers. The N93 is also said to make repair calculations based on real-time data obtained from the automotive network. We interpret this to mean that the N93 compares data received from sensors in the vehicle with preprogrammed data in its memory, and if something is determined to be amiss, the N93 either activates a warning light on the dash or sends a signal to another device that makes the desired correction. Precise information is lacking on whether this may involve electric control or the distribution of electricity, which are functions performed by programmable controllers of heading 8537. In any event, there is no indication that the N93 contains two or more apparatus of headings 8535 or 8536, which is a prerequisite for goods of heading 8537.
You have not provided supporting evidence for any of your statements relating to principal function, except with respect to the physical characteristics of the module. Based on the information before us, we are unable to determine the principal function of the N93 because we are unable to conclude whether either of the two functions is more or less significant than the other.
The General ENs to Section XVI, HTSUS, provide, with respect to multi-function and composite machines: “Where it is not possible to determine the principal function, and where, as provided in Note 3 to the Section, the context does not otherwise require, it is necessary to apply GRI 3(c)”. GRI 3(c) provides that goods cannot be classified by reference to GIR 3(a) or (b) must be classified in the heading which occurs last in numerical order among those which equally merit consideration. Under GRI 3(c), therefore, the N93 is provided for in heading 8543, HTSUS.
HOLDING:
By application of GRI 1 and 3(c), and Note 3 to Section XVI, the Central Gateway Module N93 is classified in heading 8543, HTSUS. It is specifically provided for in subheading 8543.70.9650, HTSUSA, which provides for: “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in [Chapter 85] ...: Other machines and apparatus: Other: Other: Other.” The 2007 column one, general rate of duty is 2.6% ad valorem. Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov.
EFFECT ON OTHER RULINGS:
NY L80751, dated December 1, 2004, is affirmed.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division