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HQ 957981




July 9, 1997

CLA-2 RR:TC:MM 957981 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8443.59.50

Mr. R. Kevin Williams
O'Donnell, Byrne, Basham & Williams
20 North Wacker Drive
Suite 1416
Chicago, Illinois 60606

RE: Digital Color Printers; Printing Machinery; Automatic Data Processing (ADP) Units; Functional Unit; Legal Note 5 to Chapter 84; Legal Note 4 to Section XVI; General EN to Chapter 84; HQs 088024 and 957491

Dear Mr. Williams:

This is in response to your letter dated April 27, 1995, to the then Regional Commissioner of Customs, New York, on behalf of AM Multigraphics, concerning the tariff classification of the Xeikon DCP-1 digital color printers ("DCP-1") under the Harmonized Tariff Schedule of the United States (HTSUS). Your letter was referred to this office for a response. In preparing this ruling, we also considered the information provided with your letters of May 1, 1996, and July 1, 1997. We sincerely regret the delay in responding.

FACTS:

The merchandise, labeled as the Xeikon DCP-1, is a 4-color digital printer specially designed for short-run, full color applications. Instead of requiring the costly intermediate steps, such as mechanical art, film and plate-making, commonly associated with color printing, the DCP-1 prints directly from digital data to paper. Images, text and line art can be created on any standard desktop publishing system that produces PostScript Level 2 output. The DCP-1 is an example of a new type of commercial product known in the industry as short-run printing with digital presses or "digital print-on-demand". Completed jobs are sent digitally to the DCP-1 where they are stored internally in memory for printing on the web-fed printing engine. The printing engine contains two sets of four CMYK (cyan, magenta, yellow, and black) printing units. One set of printing units is on each side of the paper, allowing for duplex printing in a single pass. The DCP-1 prints at a speed of up to 70 duplex pages per minute.

The DCP-1 consists of five subsystems: a paper supply unit; a print tower; a paper output unit; a digital system; and a cooling unit. The paper supply unit holds the paper rolls (the print web) used during the operation of the DCP-1. The paper rolls are mounted on an axle in the paper supply unit. The unit is designed so that paper rolls may be changed when a different paper size or grade is needed for a new job. The paper supply unit also conditions the paper by monitoring the moisture content. The web drive motors in the printing tower feed the paper from the paper supply unit.

The printing tower contains eight print units four on each side of the paper web) which prints the document by electrostatic means. The paper is then cooled and cut before leaving the print tower. The paper output unit receives the cut paper sheets, separating blank waste sheets and test prints from the finished product as it leaves the printing tower. The cooling unit cools the water used by the four conditioning circuits which are regulating the temperature and humidity in the printing tower, cooling the paper after it passes the heated roller, and cooling the writing heads.

The digital system, which controls the operation of the DCP-1, consists of two control computers (the host and the print engine supervisor), and three functional subsystems (the host interface, the imaging control system, and the instrumentation control system). Both computers are dedicated solely to operating the DCP-1 system and are incapable of accepting additional software other than that provided with the DCP-1.

ISSUE:

Is the DCP-1 digital color printer classifiable as an automatic data processing (ADP) printer, or as printing machinery 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.

Legal Note 4 to Section XVI, HTSUS, states that: "[w]here 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." The DCP-1 consists of five subsystems (a paper supply unit, a print tower, a paper output unit, a digital system, and a cooling unit) intended to contribute together to the clearly defined function of printing.

You claim that the DCP-1 is an ADP printer classifiable under heading 8471, HTSUS. Heading 8471, HTSUS, is governed by the terms of Legal Note 5 to Chapter 84, HTSUS, which provides, in relevant part:

(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. Subject to paragraph (E) below, a unit is to be regarded as being a part of a complete system if it meets all the following conditions:

(a) It is of a kind solely or principally used in an automatic data processing system;

(b) It is connectable to the central processing unit either directly or through one or more other units; and

(c) It is able to accept or deliver data in a form (codes or signals) which can be used by the system.

(D) Printers, keyboards, X-Y coordinate input devices and disk storage units which satisfy the conditions of paragraphs (B)(b) and (B)(c) above, are in all cases to be classified as units of heading 8471.

(E) Machines performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.

Based upon Legal Note 5(B) and 5(D), you state that the DCP-1 is an ADP printer. However, the DCP-1 is more than just an ADP printer, it is an entire printing system which acts as a functional unit designed to replace off-set printing presses. Legal Note 5(E) to chapter 84 clearly states that machines performing a specific function are to be classified in the heading appropriate to their respective functions.

The issue remains which of the above legal notes determines the classification of the subject merchandise. In HQ 957491, dated July 31, 1996, Customs stated that Legal Note 5(D) must be read in light of Legal Note 5(E) to chapter 84, HTSUS. Customs concluded that "while note 5(D) negates the sole or principal use requirement when considering the classification of printers, keyboards, X-Y coordinate input devices and disk storage units, note 5(E) provides a separate prerequisite to the classification of any ADP machine and, therefore, ADP unit."

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the HTSUS. While not legally binding nor 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). General EN (E) for Chapter 84, states that:

MACHINES INCORPORATING OR WORKING IN CONJUNCTION WITH AN AUTOMATIC DATA PROCESSING MACHINE AND PERFORMING A SPECIFIC FUNCTION

In accordance with the provisions of the last paragraph of Note 5 to Chapter 84, the following classification principles should be applied in the case of a machine incorporating or working in conjunction with an automatic data processing machine, and performing a specific function:

(i) A machine incorporating an automatic data processing machine and performing a specific function other than data processing is classifiable in the heading corresponding to the function of that machine or, in the absence of a specific heading, in a residual heading, and not in heading 84.71.

(ii) Machines presented with an automatic data processing machine and intended to work in conjunction therewith to perform a specific function other than data processing, are to be classified as follows: the automatic data processing machine must be classified separately in heading 84.71 and the other machines in the heading corresponding to the function which they perform unless, by application of Note 4 to Section XVI or Note 3 to Chapter 90, the whole is classified in another heading of Chapter 84, Chapter 85 or of Chapter 90 [emphasis added].

According to the sales literature, the DCP-1's technology "will revolutionize short-run, full color printing with faster turnaround, targeted custom documents and increased profits." On December 5, 1993, The New York Times published an article titled "Gutenberg Goes Digital", which states, in part, that: "[a] new generation of presses is emerging that eliminates the metal plates, creating flexibility that should allow shorter press runs and even let the publisher make on-the-fly changes. A full-color advertising circular, for example, could carry a message tailored to each individual customer."

Based upon the information in the above-cited articles, we find that the DCP-1 is a functional unit by application of Legal Note 4 to Section XVI and Legal Note 5(E) to chapter 84, and is performing the specific function of short-run four color printing. Heading 8443, provides for printing machinery. Therefore, we find that the DCP-1 is classifiable under heading 8443, HTSUS, as printing machinery.

We note that it has been suggested that the EN 84.43 for this heading limits printing machinery to those types of machines that print by means of the type, printing blocks, plates or cylinders of heading 8442, HTSUS. However, nothing in the legal text of heading 8443 provides for such limitations. Furthermore, "[i]t must also be remembered that the tariff statutes were enacted 'not only for the present but also for the future, thereby embracing articles produced by technologies which may not have been employed or known to commerce at the time of the enactment * * *.'" Nec America, Inc. v. United States, 8 CIT 184, 186(1984), citing Corporacion Sublistatica, S.A. v. United States, 1 CIT 120, 126, 511 F.Supp. 805, 809 (1981); See also Davis Turner & Co. v. United States, 45 CCPA 39, 41, C.A.D. 669 (1957). See also Simmon Omega, Inc. v. United States, 83 Cust.Ct. 14, C.D. 4815 (1979), and Trans-Atlantic Co. v. United States, 471 F.2d 1397, 60 CCPA 100, C.A.D. 1088 (1973), in which the courts have held that technological advancements and "improvement in the design of an article does not militate against its continuing to be a form of the named articles." See HQ 088024 (January 3, 1991), in which Customs held that the 3M Digital Matchprint Color Proofing System was a technologically advanced, special purpose, printing proofing system suitable only for proofing printing jobs and therefore classifiable under subheading 8443.50.50 [now 8443.59.50], HTSUS, as other printing machinery.

We further note that the merchandise includes software. Legal Note 6 to chapter 85, HTSUS, provides that "[r]ecords, tapes and other media of heading 8523 or 8524 remain classified in those headings, whether or not they are entered with the apparatus for which they are intended." In HQ 950675, dated January 7, 1992, Customs held that software, whether imported in floppy disk form or downloaded onto the system's hard disk drive, was classifiable under heading 8524, HTSUS, whether or not entered with the rest of the system. Therefore, the subject software should be classified separately under heading 8524, HTSUS. At the time of entry, the proper subheading shall be determined based upon what type of media the software is recorded on and whether or not it contains sounds and images.

HOLDING:

Based upon the application of Legal Note 4 to Section XVI, the Xeikon DCP-1 digital color printer is classifiable under subheading 8443.59.50, HTSUS, which provides for: "[p]rinting machinery, including ink-jet printing machines, other than those of heading 8471. . . : [o]ther printing machinery: [o]ther: [o]ther. . . ." The column one, general rate of duty is 1.3 percent ad valorem.

The software is classified within heading 8524, HTSUS, as recorded media. At the time of entry, the proper subheading shall be determined based upon what type of media the software is recorded on and whether or not it contains sounds and images.

Sincerely,

John Durant, Director
Tariff Classification Appeals Division

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