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HQ 557024


June 30, 1993

CLA-2 CO:R:C:S 557024 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50, 8471.91.00, 8471.92.20, 8471.92.40

District Director of Customs
Buffalo, New York 14202

RE: Internal Advice No. 45/91; Computer Assisted Medical Reconstruction and Analysis System; Alteration; HRL 556992

Dear Sir:

This is in reference to your memorandum dated July 17, 1991, forwarding a letter dated May 31, 1991, from PBB USA Inc., requesting internal advice with respect to the applicability of subheading 9802.00.50, Harmonized Tariff System of the United States (HTSUS), to the "host computer", part of the Computer Assisted Medical Reconstruction and Analysis system (CAMRA), currently being imported into the U.S. Request is also made for our opinion as to the proper classification of the host computer, and country of origin marking requirements for the imported system and its components.

FACTS:

The CAMRA system consists essentially of a host computer with the ISG Graphic subsystem ("board set"), a monitor, keyboard, tape drive, printer, modem, and specialized software. The system was designed, constructed and programmed to provide medical personnel with a computer-enhanced, two or three-dimensional image of cat scans, x-rays and other one-dimensional images. It is a tool used in the diagnosis of medical conditions, diseases, etc. The importer sells these systems exclusively to hospitals, clinics, research laboratories, medical centers, etc.

The host computer is of U.S. origin and is sent to Canada where it is modified by the addition of the Canadian produced board set. The purpose of this modification, according to the importer, is to increase the data processing speed of the computer to enable it to handle the complex software to be utilized. The other components, which may be U.S. origin, or from other countries such as Canada, Japan, or Korea, are added to complete the system. After final configuration and testing, the board set is removed from the system and packaged separately, before the complete system is shipped to the U.S.

ISSUES:

1. What is the classification of the host computer used with the CAMRA system?

2. Does the addition of the board set in Canada constitute an alteration of the host computer, within the meaning of subheading 9802.00.50, HTSUS?

3. What is the proper country of origin for marking purposes of the host computer and of the components comprising the CAMRA system?

LAW AND ANALYSIS:

1. Classification

The importer states that the host computer for the CAMRA system "is a standard computer workstation which is purchased from Silicon Graphics or Sun Microsystems.... The computer itself is an off the shelf piece of equipment that can be bought by any customer, anywhere in the United States. (Emphasis added.) Into this system, ISG incorporates its parallel processing accelerator board [in Canada] in order to speed up the system to allow it to process 3D images generated on the ISG Allegro system [and then it is imported back into the United States]."

Upon export from the United States, the host computer is classified under the following provisions:

Processor - 8471.91.00 which provides for "Digital processing units"

Keyboard - 8471.92.20 which provides for "Keyboards"

Monitor - 8471.92.40 which provides for "Display units; Other"

It is our opinion that when the host computer is imported with the incorporated parallel processing accelerator, the same classifications apply because at importation, the computer is not dedicated to medical, surgical, dental or veterinary sciences (heading 9018), it merely has improved processing capabilities.

2. Subheading 9802.00.50, HTSUS

Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles returned to the U.S. after having been exported to be advanced in value or improved in condition by means of repairs or alterations. Such articles are dutiable only upon
the value of the foreign repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. However, entitlement to this tariff provision is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See, A.F Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956); Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Tariff treatment under subheading 9802.00.50, HTSUS, is also precluded where the exported articles are incomplete for their intended use prior to the foreign processing. Guardian; Dolliff & Company, Inc. v. United States, 81 C.A.D. 1225, 82, 599 F.2d 1015, 1019 (1979).

In Headquarters Ruling Letter (HRL) 556992, dated May 7, 1993, notebook computers with a monochrome video display were to be sent abroad at the customer's option to have the monochrome display replaced with a color display feature. The upgraded unit would retain all of the original capabilities of the exported unit, i.e., the ability to store programs, to be freely programmed, to perform computations, and to execute a program requiring logical decision. In that case, we found that the computer in its exported condition was complete for its intended use as an "automatic data processing machine". It could be used for this purpose without exercising the option to upgrade the unit. There was no change in the identity of the computer as a result of the upgrade and no new article was created. Accordingly, we found that the upgrade was an alteration within the meaning of subheading 9802.00.50, HTSUS. (See also Royal Bead Novelty v. United States, 324 F. Supp. 1394 (1972), where a lustrous coating given to glass beads also marketed in that condition was found to constitute an alteration.)

In the instant case, the importer states that the software generates the 3D views, and that a standard workstation could accomplish this task, but would take up to 60 minutes to perform this function. The added board set merely accelerates the process. The exported computer is itself a standard off-the-shelf unit that can be purchased by any customer in the U.S. The computer, or "digital processing unit", is returned from abroad after processing with the same general uses it had upon exportation, but with the added accelerator feature. As in HRL 556992, we find that the computer in its exported condition is complete for its intended use as a "Digital processing unit", and that the processing abroad does not serve to change the identity or the character of the exported article. No new article of commerce is created as a result of the processing abroad. Rather, the exported computer is merely enhanced with an accelerator feature. Accordingly, we find that the modifications performed abroad constitute an alteration within the meaning of subheading 9802.00.50, HTSUS.

3. Country of Origin Marking

In view of our findings, above, the host computer as a product of the United States exported and returned is excepted from marking pursuant to section 134.32(m), Customs Regulations (19 CFR 134.32(m)). The board set should be marked with Canada as the country of origin. In this regard, it is noted that the importer advises that these items will be separately packaged. The other components of the CAMRA system should be marked to reflect their respective countries of origin.

HOLDING:

1. Upon importation, the host computer will be classified as follows:

Processor - 8471.91.00 which provides for "Digital processing units"

Keyboard - 8471.92.00 which provides for "Keyboards"

Monitor - 8471.92.40 which provides for "Display units: Other"

2. The modification of the host computer in Canada, by the addition of the ISG Graphite subsystem, constitutes an alteration of the host computer within the meaning of subheading 9802.00.50, HTSUS. Therefore, the computer will be entitled to the partial duty exemption pursuant to that provision.

3. The host computer will be excepted from marking pursuant to 19 CFR 134.32(m). Canada will be marked as the country of origin of the ISG Graphite subsystem. The other components of the CAMRA system will be marked according to their respective countries of origin.

Sincerely,

John Durant, Director
Commercial Rulings Division

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