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HQ 957694




September 22, 1995

CLA-2 R:C:M 957694 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8537.10.90

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

RE: Protest 0901-94-101565; Virtek Single Head Nesting System; Lasers; Programmable Controllers; Optical Measuring and Checking Instruments and Apparatus; Other Optical Instruments and Apparatus; Welding Apparatus; Functional Unit; Composite Machine; Composite Good; Essential Character; Legal Note 5 to Chapter 84; Additional U.S. Note 3 to chapter 90; GRI 3(b); Headings 8515, 8537, 9013, 9031; EN 90.13; HQs 085281, 950120, 955064, clarified

Dear District Director:

The following is our decision regarding Protest 0901-94-101565, which concerns the classification of a single head nesting system under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The Virtek/Leather CAM pattern placement system, also referred to as a single head nesting system and CAD Laser Projection System (hereinafter referred to as the "Virtek System"), is designed for giving cutting instructions to obtain the optimum use of leather hides. It consists of the following components: the scanning sub-system (two CCD cameras and a laser projector system); the nesting module; and the cutting module (not imported with the rest of the system). The nesting module contains a computer which acts as a dedicated process controller because the pre-loaded software takes up all of the computer's memory.

The Virtek System is designed to make the most efficient use of leather hides to meet the production requirements of the manufacturer. To operate the Virtek System, the end-user must first place the leather hide on a scanning table where the perimeter (the outline or shape of the hide) is captured by a charged-couple device (CCD) camera and saved on the computer. The operator then points to the low-quality grade areas and flaw types by using a mouse or wand-driven low-power laser beam which are then recorded as reference points into the system. The next step is the selection of the pattern pieces which will be cut from the hide, for example, furniture parts. The pattern pieces have been previously saved on the computer. The computer takes the hide outline and fits the pattern pieces on the hide, avoiding the flawed areas and making calculations to obtain the optimum amount of pieces to be cut from the hide. The computer nests the pattern pieces and moves them around on the outline of the hide to optimize the number of pieces that can be cut from the hide. The results of the marking are shown on the computer screen along with the total area, the individual grade areas, and the flow areas as the net usable area. The information concerning the pattern layout then goes to an automatic cutting system (which is not imported) which then cuts the leather hide into the pattern pieces.

The Virtek System was entered under subheading 8515.80.00, HTSUS, as other electric welding apparatus. The entry was liquidated on July 22, 1994, under subheading 9013.80.60, HTSUS, as other optical instruments and appliances not elsewhere specified. The protest was timely filed on October 13, 1994.

Classification of the Virtek System under subheading 8537.10.90, HTSUS, as programmable controllers, or under subheading 9031.40.80, as optical measuring or checking instruments and apparatus, are also under consideration.

The subheadings and corresponding duty rates under consideration for 1994, are as follows:

8515.80.00: Electric (including electrically heated gas), laser or other light or photon beam, ultrasonic, electron beam, magnetic pulse or plasma arc soldering, brazing or welding machines and apparatus, whether or not capable of cutting . . . : [o]ther machines and apparatus. . . .

Goods classifiable under this provision have a general, column one rate of duty of 2 percent ad valorem.

8537.10.90 Boards, panels (including numerical control panels), consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90. . . : [f]or a voltage not exceeding 1,000 V: [o]ther. . . .

Goods classifiable under this provision have a general, column one rate of duty of 5.3 percent ad valorem.

9013.80.60 . . . Other optical appliances and instruments, not specified or included elsewhere in this chapter . . . : [o]ther devices, appliances and instruments: [o]ther. . . .

Goods classifiable under this provision have a general, column one rate of duty of 9 percent ad valorem.

9031.40.80 Measuring or checking instruments, appliances and machines, not specified or included elsewhere in this chapter; profile projectors; parts and accessories thereof: [o]ther optical instruments and appliances: [o]ther. . . . .

Goods classifiable under this provision have a general, column one rate of duty of 10 percent ad valorem.

ISSUE:

Whether the Virtek System is classifiable as other electric welding apparatus, or as other optical instruments and appliances not elsewhere specified, or as a programmable controller under the HTSUS?

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.

In support of the claim that the Virtek System is not classifiable as a laser under heading 9013, HTSUS, the protestant cites to the Harmonized Commodity Description and Coding System Explanatory Note (EN) for heading 9013, HTSUS. The ENs constitute the official interpretation of the HTSUS. While not legally binding or dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 FR 35127, 35128 (August 23, 1989). EN 90.13, page 1479, states that:

However, the heading excludes lasers which have been adapted to perform quite specific functions by adding ancillary equipment consisting of special devices (e.g., work-tables, work-holders, means of feeding and positioning workpieces, means of observing and checking the progress of the operation, etc.) and which, therefore, are identifiable as working machines, medical apparatus, control apparatus, measuring apparatus, etc. Machines and appliances incorporating lasers are also excluded from the heading. Insofar as their classification is not specified in the nomenclature, they should be classified with the machines or appliances having a similar function.

Examples include:

(ii) Laser soldering, brazing or welding machines and apparatus, whether or not capable of cutting (heading 85.15).

The protestant believes that the Virtek System should be classified under heading 8515, HTSUS, because the laser involved has a work table attached as described in EN 90.13. Heading 8515, HTSUS, provides for laser soldering, brazing or welding machines and apparatus, whether or not capable of cutting. While the Virtek System contains components to control a leather hide cutter, it does not contain a laser used for or in welding machines or apparatus. Therefore, the Virtek System does not meet the terms of the heading and is therefore not classifiable under heading 8515, HTSUS. We further note that the liquidated entry did not classify the merchandise as a laser under heading 9013, HTSUS, but as other optical instruments and appliances.

The scanning sub-system is not used for electric control or the distribution of electricity. Instead, the scanning sub-system is used by the Virtek System to optically measure the outline or shape of the hide. It then sends this information to a computer which determines the appropriate pattern pieces to be cut from the hide. It is our position that the scanning sub-system meets the definition of an "optical appliance" and an "optical instrument", as found in Additional U.S. Note 3 to chapter 90, HTSUS. This note provides that:

For the purposes of this chapter, the terms "optical appliances" and "optical instruments" refer only to those appliances and instruments which incorporate one or more optical elements, but do not include any appliances or instruments in which the incorporated optical element or elements are solely for viewing a scale or for some other subsidiary purpose.

The scanning sub-system incorporates optical elements (laser projector system and CCD cameras) which are not used for a subsidiary purpose. The Virtek System uses the information gathered by the scanning sub-system to determine the dimensions of the leather hide. We, therefore, find that the scanning sub-system is prima facie classifiable under heading 9031, HTSUS, as other optical measuring instruments.

The nesting module contains a computer which acts as a dedicated process controller, calculating the dimensions of the hide and the optimal number of pieces that can be cut from the hide. Legal Note 5 to Chapter 84, HTSUS, states that: "Heading 8471 does not cover machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines are classified in the headings appropriate to their respective functions or, failing that, in residual headings." Because the computer is incorporated into the nesting module which performs the specific function of a process controller, we find that the nesting module cannot be classifiable under heading 8471, HTSUS, by application of Legal Note 5 to chapter 84, HTSUS.

The nesting module is capable of processing digital signals in a computer which makes calculations and then issues instructions to the automatic cutting system to cut the leather hide into pattern pieces. This component is prima facie classifiable under heading 8537, HTSUS, as a programmable controller. Legal Note 3 to section XVI, HTSUS, states that:

Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines adapted for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.

The Virtek System cannot be classified as a composite machine, consisting of a process controller and an optical measuring instrument, because Legal Note 3 to Section XVI, HTSUS, does not apply to the apparatus or instruments of chapter 90, HTSUS.

Legal Note 3 to Chapter 90, HTSUS, states that: "[t]he provisions of note 4 to section XVI apply also to this chapter." Legal Note 4 to section XVI, HTSUS, states that:

Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.

As stated above, the Virtek System optically measures the perimeter of the hide and sends this information to a process controller which determines the appropriate pattern pieces to be cut. Therefore, the Virtek System is not a functional unit as described in Legal Note 4 to section XVI, HTSUS, because it does not have a clearly defined function covered by a single heading in chapters 84, 85, or 90, HTSUS.

Because classification in a single heading cannot be determined by applying GRI 1, we must apply the other GRI's. GRI 2(a) is not applicable here because the merchandise is not incomplete or unfinished. GRI 2(b) states that if a product is a mixture or combination of materials or substances that are, prima facie, classifiable in two or more headings, then GRI 3 applies. Because the Virtek System is a combination of the scanning sub-system and the nesting module, which are prima facie classifiable under headings 9031 and 8537, HTSUS, respectively, we must apply GRI 3.

GRI 3(a) states that if a product is classifiable in two or more headings by application of GRI 2(b), then the:
heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

The Virtek System is a composite good made up of different components which are described under different provisions of the HTSUS. Thus, those headings are to be regarded as equally specific under GRI 3(a). Therefore, GRI 3(a) fails in establishing classification, and GRI 3(b) becomes applicable. GRI 3(b) provides that:

Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

EN IX to GRI 3(b), page 4, states:

[f]or the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole but also those with separable components, provided these components are adapted one to the other and are mutually complementary and that together they form a whole which would not normally be offered for sale in separate parts. (emphasis in original)

Because the Virtek System is a composite good, we must determine which component provides the essential character. EN VIII to GRI 3(b), page 4, states that the factors will "vary as between different kinds of goods to determine the essential character of an article. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods."

We find that the nesting module imparts the essential character to the Virtek System because it takes data, analyzes it and determines what steps need to be taken to complete the primary function of the subject merchandise. We, therefore, find that the Virtek System is classifiable under subheading 8537.10.90, HTSUS, as a programmable controller.

Customs has dealt with the classification of similar merchandise like the single head nesting system, which: used a sensor to gather information and analyzed the data, determined the steps necessary to complete a project, and then issued control instructions for the operation of another device (i.e., welding apparatus or saw). In each situation, Customs held that the merchandise was classifiable under heading 8537, HTSUS, as programmable controllers, by application of GRI 1. See HQ 085281 (November 8, 1989), HQ 950120 (May 13, 1992), and HQ 955064 (February 2, 1994). The holdings in each ruling are still valid, but the Law and Analysis sections are hereby clarified based upon the analysis set forth above.

HOLDING:

For the foregoing reasons, the single head nesting system is classifiable under subheading 8537.10.90, HTSUS, as programmable controllers.

The protest should be DENIED, except to the extent reclassification of the merchandise as indicated above results in a partial allowance. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant 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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