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HQ 559728




November 27, 1996

RR:TC:SM 559728 DLD

CATEGORY: CLASSIFICATION

Port Director
U.S. Customs Service
1717 East Loop
Room 401
Houston, TX 77029

RE: Decision on Application for Further Review of Protest No. 5301-5-100092. 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 transmission electron microscope (model JEM-2010 manufactured by JEOL in Japan) with analytical and digital imaging accessories imported by the University of Texas at Austin.

FACTS:

The University of Texas at Austin placed an order on September 30, 1993, with a Japanese manufacturer for a transmission electron microscope and accessories. On December 7, 1993, Professor Llewllyn K. Rabenberg applied to Customs Headquarters for duty-free entry of the transmission electron microscope under Subheading 9810.00.60, HTSUS. The application was denied on March 24, 1994. The denial letter stated as the basis for the denial:

It is our determination that the transmission electron microscope is not eligible for duty-free treatment under subheading 9810.00.60, HTSUS, inasmuch as there is the intention to use the instrument for commercial purposes within the meaning of the governing regulations. Pursuant to subsection 301.4(a)(3) of the joint regulations of the Department of Commerce and the Department of the Treasury (15 CFR 301.4(a)(3)), the instrument which is the subject of the duty-free application must be intended for the exclusive use of the applicant institution and must not be intended to be used for commercial purposes. Commercial uses include any use by, or for the benefit of, any commercial entity.

In the response to application item 7.c., it is stated that "[t]his instrument will be part of the research facilities of the University of Texas at Austin Center for Materials Science and Engineering. It will contribute to a variety of Materials Science research activities for federal, state, and local agencies as well as for private industry. Results of these projects are normally disseminated to the public." The intention to use the electron microscope for private industry precludes approval for duty-free treatment under this program. In addition, we question whether the research results, for example those for the research on high-temperature superconducting, mentioned in application item 7.a.(3), will be disseminated to the public. Because of the above intended use for industry, the transmission electron microscope is not eligible for duty-free entry under this provision.

The microscope entered the Customs Territory of the U.S. on February 22, 1994. The entry was liquidated as dutiable on January 5, 1995. A protest was timely filed on February 21, 1995. 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.

ISSUE:

Does a transmission electron microscope imported by the University of Texas at Austin qualify as a scientific instrument or apparatus under subheading 9810.00.60, HTSUS?

LAW AND ANALYSIS:

The relevant portion of the regulations pertaining to the denial was 15 CFR 301.4(a)(3), which states that in determining the eligibility of the instrument of the application for duty-free entry under subheading 9810.00.60, HTSUS, the following criteria shall be used by the Commissioner of Customs or his designee. Customs shall determine:

Whether the instrument which is the subject of the application is intended for the exclusive use of the applicant institution and is not intended to be used for commercial purposes. For the purposes of this section, commercial uses would include, but not necessarily be limited to: Distribution or sale of the instrument by the applicant institution; any use by, or for the primary benefit of, a commercial entity: or use of the instrument for demonstration purposes in return for a fee or other valuable consideration. In making the above determination, the Commissioner may consider, among other things, whether the results of any research to be performed with the instrument will be fully and timely made available to the public. For the purposes of this section, use of an instrument for the treatment of patients is considered noncommercial. If any of the Commissioner's determinations is in the negative, the application shall be found to be outside the scope of the Act [Public Law 89-651] and shall be returned to the applicant with a statement of the reason(s) for such findings." [Emphasis added.]

The protest argues that the transmission electron microscope should be eligible for duty-free entry with regard to Customs criteria for the following reasons:

I. "Private contract work is expressly prohibited by the Board of Regents of the University of Texas." II "Results from university research are disseminated to the public through the usual channels, including publication in learned journals, preparation of theses and dissertations, and oral presentations." III. "Customs Headquarters Ruling 044875, dated April 1, 1976 .... stated that the fact that a commercial firm may derive an incidental benefit [from research funded in part by the firm] would not require a finding that [there is commercial use] ." IV. "The instrument will only be used by students, faculty and University personnel."
V. "Grant donations from private industry do not result in any control over the instrument by non-University entities."
VI. "The JEM-2010 Electron Microscope...will not be used... for the primary benefit of a commercial entity.

Contrary to the contention of the protest, private contract work is not "expressly prohibited" by the University. The Regents' Rules quoted in Dr. Rabenberg's letter of June 6, 1994, included with the protest, make it clear that contract: work is allowed if permission is requested and granted in advance.

In the denial letter of March 24, 1994, Customs had questioned whether the research results, for example those for the research on high-temperature superconducting, mentioned in application item 7.a.(3), would be disseminated to the public. The availability of the results of any research to be performed with the instrument is a factor which weighs toward approval of the application (15 CFR 301.4(a)(3)). On July 12, 1996, Customs asked Dr. Rabenberg to submit any material pertaining to the publication of the results of his research performed with the 'instrument of the application, especially any material on high-temperature superconducting.

Dr. Rabenberg replied on August 1, 1996, by submitting four items:

1. An article by Dr. Rabenberg and others published in November 1995 in the Journal of Materials Research. 2. An article by Dr. Rabenberg and another, accepted for publication in Acta Crystallographica B. 3. An article by others at the University of Texas at Austin pertaining to research on high-temperature superconducting which utilized a transmission electron microscope. This article, in which Dr. Rabenberg is thanked for the use of his instrument(s), has been submitted to the journal Physica C.
4. An abstract of the dissertation of a Ph.D. candidate supervised by Dr. Rabenberg whose research "made extensive use" of the JEM-2010 of the application.

The Customs Headquarters letter (044875 of April 1, 1976) cited by the protest as evidence that a research program partially funded by a commercial entity is not grounds for denial of the application is not a "ruling" as stated in the protest. It was an interagency opinion from Customs to the Department of Commerce office which administers half of this duty-free program. As such, it carries no weight as a precedent.

It is irrevelant that the microscope will only be used by students, faculty and University personnel. What is at issue is whether this microscope will be used for the primary benefit of a commercial entity. The protest says that the microscope will not be used for the "primary benefit" of a commercial entity but is only of "incidental benefit" to commercial entities. In view of the evidence submitted by Dr. Rabenberg in his letter dated August 1, 1996, that the research results, including those pertaining to high-temperature superconductivity, are made available to the public, Customs is now satisfied that the electron microscope will not be used by, or for the benefit of, a commercial entity. Accordingly, on August 1, 1996, the application was assigned Docket Number 96-088 and forwarded to the Department of Commerce for their processing. The Department of Commerce approved the application and the approval notice was published in the Federal Register on October 30, 1996.

HOLDING:

The subject instrument is not intended for commercial purposes, and the application is now approved by both the Customs Service and the Department of Commerce. Accordingly, the protest should be allowed in full.

In accordance with Section 3 A(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
Tariff Classification Appeals Division

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