HQ 0086537 - Internal Advice 8/90, parts of consumer transaction terminals and automatic teller machines - United States International Trade Commision Rulings

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HQ 086537

April 17, 1990

CLA-2 CO:R:C:G 086537 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 8471.92.10, 8472.90.20, 8473.40.20

District Director
55 Erieview Plaza
Cleveland, OH 44114

RE: Internal Advice 8/90, parts of consumer transaction terminals and automatic teller machines

Dear Sir:

This request for internal advice was initiated by a letter dated November 22, 1989, from the law firm of Steptoe & Johnson. Our decision follows.

FACTS:

The articles in question are components of modular delivery systems (MDSs) imported from England. The components include circuit card assemblies, card readers, cash dispensing mechanisms and currency cassettes. The components are used with consumer transaction terminals (CTTs), secure interior automated teller machines (ATMs), through-the-wall drive-up ATMs and teller assist cash dispensing systems.

The subject CTT is a free-standing unit which is directly connected to a host computer. Its capabilities include displaying and printing information, transferring funds between bank accounts, handling stop payment processing, formatting account statements, providing information on loans, stock market conditions and bank services, crediting or debiting a debit card, and acting as a point-of-sale device when a debit card is used as the means of purchase.

The various ATM models are stand-alone units which are directly connected to a host computer. They are used in retail banking facilities. The ATMs perform automatic banknote dispensing functions, deposit receipt, statement printing, and account transfer functions.

The teller assist cash dispensers are stand alone units that are cassette based, high speed, cash dispensers. They are
designed for use in financial institutions as a quick and simple method from which the teller dispenses cash. These dispensers can operate on-line attached to an intelligent terminal or off- line with an alphanumeric audit printer. The software package used with the dispensers enables the machines to dispense currency, balance figures, provide unit status messages, banknote management, and error recovery. The teller assist cash dispensers can also be used with a high speed electronic coin dispenser.

The circuit card assemblies are composed of printed circuit boards, including the motherboard and smaller circuit card assemblies. These assemblies control the functions of the CTT and the ATMs.

The card readers are electronic mechanisms which read the magnetic strip information on a bank card and pass the information to the host computer. The card reader is able to write information on the card. The card readers are used with the CTT and the ATMs.

There are two cash dispensing mechanisms at issue. Both provide fast, efficient, and secure handling of banknotes. The first cash dispensing mechanism is of modular design. The mechanism may be used with ATMs or the teller assist dispensing mechanisms. It provides rear delivery of banknotes, with front access for the servicing and replenishing of notes. The banknotes are stored in cassettes and loaded into feed modules from the front of the device. The mechanism accommodates two to six currency cassettes. The second cash dispensing mechanism is similar to the first. The two differences are that the second provides only front access to the notes and dispenses only up to four denominations.

The currency cassettes in question are used in conjunction with the cash dispensing mechanisms. The banknotes are placed into the cassettes which are then placed in the dispensing mechanisms. The cassette has its own security for the removal and replenishment of banknotes. The cassettes are for use with ATMs and the teller assist dispensing mechanism.

ISSUE:

Whether the parts in question are properly classified within heading 8473, HTSUSA, as parts of automatic data processing machines.

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..." The circuit card assemblies, card readers, cash dispensers, cassettes and parts of such components used in consumer transaction terminals and ATMs are not included in the terms of any heading. Therefore, the section and chapter notes must be examined.

Machinery and mechanical appliances are classified within the headings of Section XVI, HTSUSA. Section XVI, Note 2, HTSUSA, governs the classification of parts of machinery and mechanical appliances. If parts are not included in any of the headings within Chapters 84 and 85, HTSUSA, then they are to be classified with the machines with which they are solely or principally used. Section XVI, Note 2(a) and (b). Therefore, the classification of the MDSs must be determined so to classify the parts in question.

In accordance with GRI 1, the terms of the heading must first be examined when determining the ATMs classification. The ATMs are specifically provided for within heading 8472, HTSUSA, as "Other office machines...banknote dispensers..." Tariff classifications governed by use are determined by the principal use of the article in question. Additional U.S. Rules of Interpretation 1(a), HTSUSA. Although the ATMs have several uses, the principal use is as a banknote dispenser. The proper classification for the secure interior ATMs and the through-the- wall drive-up ATMs is within subheading 8472.90.20, HTSUSA, as "Other office machines...banknote dispensers...Automatic banknote dispensers and other coin or currency handling machines..."

Heading 8472 also specifically describes the teller assist cash dispenser. This device is a banknote dispenser. No distinction exists for dispensers used by bank customers or by bank tellers. Therefore, the teller assist cash dispenser is also classified within subheading 8472.90.20, HTSUSA, as "Other office machines...banknote dispensers...Automatic banknote dispensers and other coin or currency handling machines..."

The CTT, unlike the ATMs and the teller assist cash dispenser, is not specifically covered by any heading. Therefore, GRI 1 requires the use of the applicable section and chapter notes. Chapter 84, Note 5(A), HTSUSA, defines "automatic data processing machines (ADPS)." For a machine to be an ADP it must have four characteristics. The machine must (1) store the processing program and the data necessary for that program, (2) be freely programmable by the user, (3) perform arithmetic calculations required by the user, and (4) execute a program without human intervention. The CTT in question is not freely programmable, nor is it able to execute a program without human intervention. Therefore, the CTT is not an ADP under Chapter 84, Note 5(A).

Chapter 84, Note 5(B), HTSUSA, provides for ADP systems made of separate units. This note states:

A unit is to be regarded as being a part of the complete system if it meets all of the following conditions:

(a) It is connectable to the central processing unit either directly or through one or more units; and

(b) It is specifically designed as part of such a system (it must, in particular, unless it is a power supply unit, be able to accept or deliver data in a form (code or signals) which can be used by the system.

Such units entered separately are also to be classified in heading 8471.

The CTT is directly connected to the host computer. The CTT is designed to work with the computer system. Furthermore, the CTT's design has the physical and technical features of an ADP. It is the opinion of this office that the CTT is an ADP, classifiable within 8471. The CTT acts as an input/output device for the computer system. The proper classification for the CTT is within subheading 8471.92.10, HTSUSA, as "[ADP] machines and units thereof...Other...Input or output units whether or not entered with the rest of the system and whether or not containing storage units in the same housing...Combined input/output units..."

The circuit card assemblies and the card readers are equally usable as parts of both the CTT and ATMs. The assemblies and the card readers are subject to Section XVI, Note 2. Since there are no headings of chapter 84 or 85 which describe the circuit assemblies or the card readers, they must be classified according to the machine with which they are solely or principally used. Section XVI, Note 2(a) and (b). Since both parts are not solely used with one machine, it must be determined which of the machines, the CTT or the ATMs, with which they are principally used. The use of ATMs in this country clearly dominates over the use of CTTs. The circuit card assemblies and the card readers in question are principally used with ATMs and are classified as parts of ATMs. The appropriate classification for the circuit card assemblies and the card readers is within subheading 8473.40.20, HTSUSA, as "...Parts and accessories of the machines of heading 8472...Of automatic banknote dispensers and other coin or currency handling machines of subheading 8472.90.20..."

The cash dispensing mechanisms and the currency cassettes are principally used with banknote dispensers -- the ATMS and the teller assist dispensing mechanism. In accordance with

Section XVI, Note 2(b), these cash dispensing mechanisms and cassettes are properly classified within subheading 8473.40.20, HTSUSA, as "...Parts and accessories of the machines of heading 8472...Of automatic banknote dispensers and other coin or currency handling machines of subheading 8472.90.20..."

HOLDING:

The consumer transaction terminal is a unit of an automatic data processing system within the meaning of Chapter 84, Note 5(B), HTSUSA. The CTT is properly classified within, subheading 8471.92.10, HTSUSA, as "[ADP] machines and units thereof...Other...Input or output units whether or not entered with the rest of the system and whether or not containing storage units in the same housing...Combined input/output units..."

The through-the-wall ATMs and the teller assist dispensing mechanism are banknote dispensers. Banknote dispensers are specifically provided for within heading 8472, HTSUSA. The appropriate classification for the ATMs and the teller assist dispensing mechanism is within subheading 8472.90.20, HTSUSA, as "Other office machines...banknote dispensers...Automatic banknote dispensers and other coin or currency handling machines..."

The circuit card assemblies and the card readers, although used with both the CTT and the ATMs, are principally used with the ATMs. Therefore, they are parts of banknote dispensers and classified within subheading 8473.40.20, HTSUSA, as "...Parts and accessories of the machines of heading 8472...Of automatic banknote dispensers and other coin or currency handling machines of subheading 8472.90.20..."

The cash dispensing mechanisms and the currency cassettes are principally used with banknote dispensers -- the ATMS and the teller assist dispensing mechanism. Therefore, they are parts of banknote dispensers and classified within subheading 8473.40.20, HTSUSA, as "...Parts and accessories of the machines of heading 8472...Of automatic banknote dispensers and other coin or currency handling machines of subheading 8472.90.20..."

You should inform the internal advice applicant of this decision.

Sincerely,

John Durant, Director
Commercial Rulings Division

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