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HQ 957533




March 13, 1995

CLA-2 CO:R:C:M 957533 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8471.93.40

District Director of Customs
112 W. Stutsman Street
Pembina, ND 58271

RE: I/A; Head Disk Assemblies (HDA); Head Disk Units (HDU); Disk Storage Subsystems; Chapter 84, Legal Note 5(B); North American Free Trade Agreement (NAFTA); General Notes 12(b) and 12(t)/84.200; 8473.30.50; HQs 956549, 951008; NYs 803342, 886637

Dear District Director:

This is in reference to your memorandum of November 21, 1994 (CLA-1-01-CO:IS JK) regarding the Internal Advice request submitted by counsel on behalf of Unisys Corporation, concerning the classification of head disk assemblies (HDA) which are incorporated into a disk storage subsystem under the Harmonized Tariff Schedule of the United States (HTSUS), and the applicability of the North American Free Trade Agreement (NAFTA).

FACTS:

The subject merchandise entered into the United States from Canada, is the Unisys USP 2010 and/or RM 36 Disk Subsystems which are finished and ready for connection to main frame computers. The Disk Subsystems are free-standing units approximately 24 inches in width, 36 inches in depth, and from 36 to 72 inches in height, depending upon the specific model. Inside of the Disk Subsystems are modules, racks and cabling that perform specific functions such as storage, power and cooling, control, communications, and interface. The specific modules contained in the housing includes channel racks (or controllers), control modules, operator interface panel, power and cooling modules, and the data storage modules (Unity storage racks or USRs). Each of the USRs is designed to house a maximum of five or seven Unity storage devices (USD), two power and cooling modules, and up to seven feature cards. Each USD consists of a metal device cage into which are assembled an Operator Interface Circuit Board, and optional Input/ Output Circuit Board, a "Hot Plug" Circuit Board, and a Head Disk Assembly (HDA). All of the components except the HDA are from Canada, Mexico, or the United States.

The HDA, which is imported from Japan into Canada, contains a magnetic disk media, a drive motor, read-write heads and actuating mechanism, and the read-write circuitry, in a single hermetically sealed housing. The HDAs have storage capacities ranging from one, two, or four gigabytes.

The internal advice applicant states that the HDA imported into Canada is classified under subheading 8473.30.40, HTSUS, as parts and accessories of ADP machines. You indicate that the HDA is properly classifiable under subheading 8471.93.40, HTSUS, as magnetic disk drive storage units, whether or not entered with the rest of a system.

The subheadings under consideration are as follows:

8471.93.40: Automatic data processing machines and units thereof. . . . : [o]ther: [s]torage units, whether or not entered with the rest of a system: [m]agnetic disk drive units: [o]ther . . . .

Goods classifiable under this provision have a general, column one rate of duty of 3 percent ad valorem. Goods eligible for NAFTA duty preference under this provision have a special, column one rate of duty of free.

8473.30.50 Parts and accessories . . . suitable for use solely or principally with machines of headings 8469 to 8472: [p]arts and accessories of the machines of heading 8471: [n]ot incorporating a cathode ray tube: [o]ther: [o]ther. . . .

Goods classifiable under this provision have a general, column one rate of duty of free.

ISSUE:

Whether the HDAs are classifiable as storage units for physical incorporation into ADP machines or as parts of ADP machines under the HTSUS?

Does the Disk Subsystems qualify for preferential treatment under the NAFTA?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's). GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.

Legal Note 5(B) to Chapter 84, HTSUS, defines units of ADP machines as follows:

Automatic data processing machines may be in the form of systems consisting of a variable number of separately-housed units. A unit is to be regarded as being a part of the complete system if it meets all the following conditions:

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

(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).

The Disk Subsystems meet the definition of ADP units as defined by Legal Note 5(B) to Chapter 84, HTSUS, because they are separately housed units which are able to accept or deliver data in a form which can be used by the mainframe computer. The Disk Subsystems are classifiable under subheading 8471.93.40, HTSUS, as other storage units for ADP machines.

The issue to be decided is whether or not the HDA, which is part of the Disk Subsystem, is classifiable as a storage unit under heading 8471, HTSUS, or as a part of ADP machines. Reference was made to HQ 951008, dated May 14, 1992, and HQ 956549, dated August 22, 1994, wherein disk drive storage units were held to be classifiable in subheading 8471.93.40, HTSUS. We note that the merchandise in HQ 951008 consisted of more than the subject HDA. The disk drive unit in HQ 951008 consisted of: a hermetically sealed unit containing the 8 inch platters as well as the read/write assembly; and the power supply and fan cooling in a single enclosure. After importation, the disk drive unit was mounted in a rack with other similar hard drives and controllers. The merchandise classified in HQ 951008 is similar to the USD in which the subject HDA has been assembled into. Therefore, we find that HQ 951008 is not dispositive to the classification of the subject HDA.

We further note that HQ 956549 dealt with the eligibility of an ADP storage unit containing a Japanese origin disk drive under the United States-Canada Free Trade Agreement ("CFTA"). Rulings which have determined that merchandise are ineligible for CFTA duty preference have no binding effect on the same or similar merchandise's eligibility under the NAFTA due to the change in the law. Therefore, we find that HQ 956549 is not persuasive in this situation.

We find that the HDA does not meet the Legal Note 5(B) to chapter 84, HTSUS, requirements for ADP "units" because it cannot accept and deliver data in a form which can be used by the system (i.e., the HDA will not contain the interface and I/0 PCBs). Because the HDA does not meet the definition of an ADP "unit", classification under heading 8471, HTSUS is precluded. However, the HDA is designed to be used solely or principally with ADP machines. Therefore, we find that the HDAs from Japan are classifiable under subheading 8473.30.50, HTSUS. See NY 803342, dated October 26, 1994; NY 886637, dated June 4, 1993.

NAFTA ELIGIBILITY:

To be eligible for tariff preferences under the North American Free Trade Agreement (NAFTA), goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. General Note 12(b), HTSUS, states in pertinent part:

[f]or the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if--

(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico, and/or the United States; or

(ii) that they have been transformed in the territory of Canada, Mexico and/or the United States so that--

(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or

(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note...

Because the Disk Subsystem contains parts from countries other than Mexico, Canada, and/or the United States, General Note 12(b)(i), HTSUS, does not apply. Therefore, we must resort to General Note 12(b)(ii)(A), HTSUS. The change in tariff classification rules set forth in General Note 12(t)/84.200, HTSUS, states that: "[a] change to subheading 8471.93 from any other subheading."

Therefore, any non-originating materials used in the production of the Disk Subsystem must be classified under a tariff item other than subheading 8471.93, HTSUS. The non-originating HDA is provided for under subheading 8473.30.50, HTSUS. Because a change in tariff classification does occur and meets the terms of General Note 12(t)/84.200, HTSUS, we find that the Disk Subsystem is eligible for preferential tariff treatment under the NAFTA.

HOLDING:

The Unisys USP 2010 and/or RM 36 Disk Subsystems are classifiable under subheading 8471.93.40, HTSUS, which provides for: "Automatic data processing machines and units thereof. . . . : [o]ther: [s]torage units, whether or not entered with the rest of a system: [m]agnetic disk drive units: [o]ther: [o]ther . . . . " Goods eligible for NAFTA duty preference under this provision have a special, column one rate of duty of free.

Please advise the internal advice applicant of this 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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