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HQ 559060





August 14, 1995

R:C:S 559060 DLD

CATEGORY: CLASSIFICATION

District Director of Customs
111 W. Huron Street
Room 603
Buffalo, NY 14202-2378

RE: Decision on Application for Further Review of Protest No. 0901-94-101945. Subheading 9810.00.60 (HTSUS): Duty Free Treatment of Scientific Instruments

Dear Sir:

This protest was filed against your decision in the liquidation as dutiable of a ring transducer and associated connector[s] imported by the University of Rochester Medical Center, Rochester, New York.

FACTS:

The University of Rochester Medical Center placed an order on May 18, 1993, with a Japanese manufacturer for a ring transducer to be made in accordance with the University's specifications. On August 17, 1993, Professor Robert C. Waag applied to Customs Headquarters for duty-free entry of the ring transducer under subheading 9810.00.60, HTSUS. The application was denied on November 5, 1993. The denial letter stated as the basis for the denial:

It is our determination that the ring transducer and associated connector are not eligible for duty-free treatment under subheading 9810.00.60, HTSUS. On September 16, 1993, we asked what other equipment must be added to this transducer and connector in order to conduct your scattering and image reconstruction experiments and what would be its cost. You replied on October 11, 1993, that:

Use of the transducer requires electronics that also must be custom built. The electronics consists of a multiplexer unit for transmit and receive, transmit circuitry, receive circuitry, and a control unit. We have just contracted with a vendor in the United States to make the control unit for a cost of $160,000.

The price of the imported transducer is $70,000, whereas the cost of just one of the components needed to comprise the instrument which is being built in your lab is more than twice that amount. Accordingly, the transducer and connector must be considered to be components of a larger instrument being assembled in the U.S. Pursuant to subsection 301.2(k) of the joint regulations of the Department of Commerce and the Department of the Treasury (15 CFR 301.2(k)), a com- ponent of an instrument is a pan or assembly of parts which is substantially less than the instrument to which it relates. A component enables an instrument to function at a specified minimum level. That is, a component is a necessary part of an instrument but is not itself an instrument. Components are not eligible for duty-free treatment under subheading 9810.00.60, HTSUS.

On June 1, 1994, the ring transducer entered the Customs territory of the U.S. On October 28, 1994, the entry was liquidated as dutiable on the basis of the above denial of duty-free entry under subheading 9810.00.60, HTSUS. A protest was timely filed with the Buffalo, New York District Director on December 13, 1994. The protest was subsequently forwarded to Customs Headquarters for further review pursuant to 19 CFR 174.24(c). This is the response of Customs Headquarters to the protest.

The protest argues that duty-free entry should be allowed because:

1. The imported transducer should be considered to be an instrument and not a component. Hence, it is eligible for duty-free treatment because it is the chief and central element of the final device.

2. The electronics to be added in the U.S. should be considered "accessories" not "components.": Hence, they are in a sense, optional and not necessary for the functioning of the final device.

3. Although the cost of the electronics to be added in the U.S. is $160,000, the final device could function with other electronics. For example, some was recently acquired, the cost of which is no more than $1,600. (Note that the University of Rochester letter of October 11, 1993, quoted above states: "We have just contracted with a vendor in the United States to make the control unit [alone] for $160,000." But Note 1 of the protest now states that the total cost of all the items to be added in the U S. is $160,000.)

ISSUE:

Does a ring transducer and associated connector imported by the University of Rochester Medical Center qualify as a scientific instrument or apparatus under subheading 9810.00.60, HTSUS?

LAW AND ANALYSIS:

Pursuant to subsection 301.2(h) of the regulations, an accessory may be either "pan of an instrument or an attachment to an instrument" (15 CFR 301.2(h)). Subsection 301.2(k) distinguishes between a component and an accessory as follows: "A component enables an instrument to function at a specified minimum level, while an accessory adds to the capability of an instrument" (15 CFR 301.2(k)). As previously cited in the November 5, 1993, denial letter, the regulations state that a component is a pan or assembly of pans which is "substantially less" than the instrument to which it relates. Accessories are eligible for duty-free treatment under subheading 9810.00.60, HTSUS, but components are not.

Customs agrees that the ring transducer, elements and connectors, with the other pans of the importation, i.e., the tank and lens, comprise the heart of the final device. But the imported pans when assembled cannot function as an instrument. The question to be decided is, whether the additional pans, e.g., electronics, etc., required to make the device function to measure scattering or to operate as a novel imaging system are substantial and comprise an important part of the final device, or are minor, subsidiary and incidental in nature. One would obviously not deny duty-free entry to an imported device which lacked only an electric power cord to make it functional.

When the applicant was asked what other equipment must be added to conduct his proposed experiments, he replied that electronics costing $160,000 was required. But when this caused the application to be denied, he stated that the device could be operated with electronics costing one hundredth that amount. (In fairness, it should be said that this latter equipment was purchased after the application had been denied and therefore could not have been mentioned in response to our query.) Customs has in the past denied other duty-free applications for transducers for which the electronics had to be added in the U.S. to make the device function.

In any case, the protestant has failed to establish that the importation alone can perform a scientific function after assembly. While the protestant states that "[t]he ring transducer is, in fact, quite functional when used with other electronic control and data acquisition systems", the fact remains that the device requires additional electronics in order to function in its intended uses and cannot function without it. Such added electronics must therefore be considered "components" of the final instrument pursuant to 15 CFR 301.2(k) since it "enables an instrument to function at a specified minimum level". The imported items (and the item resulting when they are assembled) must also be considered components inasmuch as they cannot function as an instrument and require other electronic components to make an operational instrument. Components are not eligible for duty-free treatment under subheading 9810.00.60, HTSUS.

HOLDING:

The protest is denied in full. It is affirmed that the ring transducer and associated imported parts, alone or when assembled, do not comprise an "instrument", but are "components" of an instrument being assembled in the U.S. and are therefore ineligible for duty-free treatment under subheading 9810.00.60, HTSUS, pursuant to 15 CFR 301.2(k).

In accordance with Section 3A( 11 )(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, a copy of this decision should be attached to the Customs Form 19 and mailed by your office to the protestant as part of the notice of action on the protest no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division


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