HQ 0954307 - Protest No. 2720-93-200154; Automatic Data Processing Machine; ADP; Parts; Without CPU, Oscillator, or Hard Drive; Subassemblies; Keyboards; HQs 950221, 088118, 087695, 085894, 951438 - United States International Trade Commision Rulings

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HQ 954307

October 5, 1993

CLA-2 CO:R:C:M 954307 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 8473.30.40; 8471.92.20

District Director
U.S. Customs Service
Air Transportation Division
5758 West Century Blvd.
Los Angeles International Airport
Los Angeles, CA 90045

RE: Protest No. 2720-93-200154; Automatic Data Processing Machine; ADP; Parts; Without CPU, Oscillator, or Hard Drive; Subassemblies; Keyboards; HQs 950221, 088118, 087695, 085894, 951438

Dear District Director:

This is our response to Protest Number 2720-93-200154, dated April 13, 1993, and Application for Further Review, regarding the classification of automatic data processing ("ADP") machine subassemblies and keyboards, under the Harmonized Tariff Schedule of the United States (HTSUS). The subject merchandise was entered between October 14, 1992 and November 10, 1992, and the entries were liquidated on January 15, 1993 and February 26, 1993. The protest was timely filed on April 13, 1993.

FACTS:

This protest relates to fourteen shipments of subassemblies and keyboards for personal computers and workstations (model numbers CPC-2000, CPC-2300, and CPC-2400).

The shipments were entered under subheading 8473.30.40, HTSUS, which provides for parts of ADP machines, at a Free rate of duty. Subsequently, pursuant to Notices of Action, the port reclassified the merchandise under subheading 8471.91.00, HTSUS, which provides for digital processing units, at 3.9% ad valorem.

Daewoo International imports these subassemblies in order to design the ADPs to a customers needs, after importation to the U.S. Final assembly takes place in the U.S. All of these subassemblies are imported missing, at least, a central processing unit ("CPU"),
an oscillator (to provide CPU timing), and a hard disk drive. Daewoo can assemble two hundred and forty (240) different ADP configurations from the merchandise imported.

The exact nature of the protested importations is as follows:

-CPC-2000: Case/chassis
5.25" floppy drive
3.5" floppy drive
Motherboard without CPU
Power supply
Input/Output controller board
VGA controller board
Power cable

-CPC-2300: Case/chassis
5.25" floppy drive
3.5" floppy drive
Motherboard without CPU
CPU card without microprocessor
Power supply
VGA controller board
Power cable

-CPC-2400 Case/chassis
5.25" floppy drive
3.5" floppy drive
Motherboard without CPU
CPU card without microprocessor
Power supply
VGA controller board
Power cable
CPU card

The final assembly configuration is not known at the time of importation, however, in the majority of cases, the cost of the missing parts exceeds that of the cost of the imported parts.

ISSUE:

How are the subject ADP machine subassemblies/parts classified under the Harmonized Tariff Schedule of the United States (HTSUS)?

LAW AND ANALYSIS:

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part:

...classification shall be determined according to the terms of the headings and any relative section or chapter notes...

An ADP "motherboard" is the main interconnecting circuit board in an electronic device, to which the various subassemblies, such as printed circuit boards, are plugged or wired. See Webster's New World Dictionary, Third College Edition (1988), page 886. See HQ 085894, dated February 14, 1990.

Complete ADP "Motherboards" with CPUs have been consistently deemed to possess the essential character of an ADP processing unit. Therefore, a "motherboard" containing a CPU is properly classifiable in subheading 8471.91.00, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof: [o]ther: [d]igital processing units, whether or not entered with the rest of a system...."

The classification of a "motherboard" without a CPU was addressed in HQ 088118, dated February 22, 1991, which held that it was classifiable under subheading 8473.30.40, HTSUS, which provides for: "[p]arts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with the machines of headings 8469 to 8472: [p]arts and accessories of the machines of heading 8471: [n]ot incorporating a cathode ray tube."

GRI 2(a) provides direction regarding unfinished and incomplete articles. It states:

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) although not dispositive, should be looked to for the proper interpretation of the HTSUS. See 54 Fed. Reg. 35128 (August 23, 1989). The relevant ENs, page 2, provide some guidance on the application of GRI 2(a) to unassembled goods by stating that "when goods are so presented it is usually for reasons such as requirements or convenience of packing, handling or transport." The ENs provide further that for purposes of Rule 2(a) the expression "articles presented unassembled or disassembled" means articles the components of which are to be assembled either by means of simple fixing devices (screws, nuts, bolts, etc.) or by riveting or welding, for example, provided only simple assembly operations are involved. However, the instant importations are missing some of the most important parts and require complex assembly operations to become finished goods.

The ENs, regarding the Section XVI General Notes, further elaborate when they state the following on page 1132:

(IV) Incomplete Machines

Throughout the section any reference to a machine or apparatus covers not only the complete machine, but also an incomplete machine (i.e., an assembly of parts so far advanced that it already has the main essential features of the complete machine). Thus a machine lacking only a flywheel, a bed plate, calendar rolls, tool holders, etc., is classified in the same heading as the machine, and not in any separate heading providing for parts. Similarly a machine or apparatus normally incorporating an electric motor (e.g., electro- mechanical hand tools of heading 85.08) is classified in the same heading as the corresponding complete machine even if presented without that motor.

Most importantly, the classification of an ADP subassembly missing the CPU, hard disk drive and memory module, was addressed in HQ 951438, dated March 2, 1993. That decision determined that a similar ADP subassembly did not rise to the level of an incomplete processor unit since it did not have the main essential features of the complete processor unit.

Similarly, for the same reasons, the instant importations do not impart the main essential features of a finished processor unit due to the significance of the omitted parts.

Although the instant importations do not rise to the level of incomplete processor units, in their imported state as subassemblies, they also do not have the essential character of any of their constituent components/parts, with the exception of the keyboards.

ADP keyboards are separately classifiable in subheading 8471.92.20, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof: [o]ther: [o]ther: [k]eyboards." Therefore, since the keyboards are not part of the subassemblies, but are separately classifiable ADP units, they are classifiable under subheading 8471.92.20, HTSUS.

In determining whether an item is a part of an article, the courts look to the "nature, function, and purpose of an item in relation to the article to which it is attached or designed to serve...." Ideal Toy Corp. v. United States, 58 CCPA 9, 13, C.A.D. 996, 433 F.2d 801, 803 (1979). See Clipper Belt Lacer Co., Inc. v. United States, Slip Op. 90-22 (March 13, 1990).

The instant subassemblies are clearly necessary to the completion of the ADP system, as integral, constituent, and component parts. Therefore, for tariff purposes, they should be
considered "parts" of the machines of 8471, HTSUS. They are classifiable in subheading 8473.30.40, HTSUS, which provides for: "[p]arts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with the machines of headings 8469 to 8472: [p]arts and accessories of the machines of heading 8471: [n]ot incorporating a cathode ray tube."

HOLDING:

The subject merchandise, imported together as ADP processor unit subassemblies, are classifiable as "parts" of the machines of 8471, HTSUS, in subheading 8473.30.40, HTSUS, which provides for: "[p]arts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with the machines of headings 8469 to 8472: [p]arts and accessories of the machines of heading 8471: [n]ot incorporating a cathode ray tube," at a Free rate of duty.

The ADP keyboards are separately classifiable in subheading 8471.92.20, HTSUS, which provides for: "[a]utomatic data processing machines and units thereof: [o]ther: [o]ther: [k]eyboards," at a Free rate of duty.

Since reclassification of the merchandise as indicated above will result in the same rate of duty as the claimed classification, you should allow the protest in full. A copy of this decision should be attached to the Customs Form 19 and provided to the protestant as part of the notice of action on the protest.

Sincerely,

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