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HQ 967514

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June 10, 2005

CLA-2-RR:CR:GC 967514 IOR

CATEGORY: CLASSIFICATION

Tariff No.: 8472.90.80; 8504.40.95

John M. Peterson, Esq.
Neville Peterson LLP
17 State Street – 19th Floor
New York, NY 10004

RE: Xerox Part No. 156P14498, low voltage power supply; Xerox iGen3 Digital Production Press print engine; NY I81178, affirmed

Dear Mr. Peterson:

This is in response to your letter of December 10, 2004, on behalf of Xerox Corporation, concerning the classification under the Harmonized Tariff Schedule of the United States (HTSUS), of Xerox Part No. 156P14498 low voltage power supply, and your associated request for reconsideration of New York Ruling (NY) I81178, dated May 20, 2002, issued by the Customs and Border Protection (CBP), National Commodity Specialist Division.

FACTS:

Xerox Part No. 156P14498 low voltage power supply (hereinafter referred to as “156P14498 power supply”) is specially designed for physical incorporation into Xerox’s iGen3 digital production press (hereinafter referred to as “iGen3”). You submit that 156P14498 power supply is classified under subheading 8504.40.60, HTSUS, as “power supplies for automatic data processing machines or units thereof of heading 8471.”

In your submission you describe 156P14498 power supply as a dual brush cleaner power supply which is designed specifically for use in, and physical incorporation into the iGen3. The 156P14498 power supply will be in the form of a board-level assembly on which will be mounted a 12 pin input power connector, a 50 pin signal connector, and a 5 pin high voltage output connector. These are connected to rectifiers which are designed to convert and direct current.

In order to determine the classification of 156P14498 power supply, it is necessary to determine the classification of iGen3. You refer to the iGen3 as a “multifunction printer,” and submit that it is a unit of an automatic data processing (“ADP”) machine of heading 8471, HTSUS, and that it should be classified under subheading 8471.60, HTSUS, as “[a]utomatic data processing machines and units thereof: Input or output units, whether or not containing storage units in the same housing.”

In NY I81178, the iGen3 was described as follows:

The merchandise is described as the iGen3 Print Engine. Descriptive literature was submitted with your request. The iGen3 is a high-speed color laser digital production press designed to meet the needs of commercial printers in the graphic arts industry. The iGen3 required the development of a new imaging system, new approaches to paper transport, and new control systems. Its quality and variety rivals offset printing. It is designed for short run, print on demand, fast turnaround, variable information printing. The iGen3 produces graphic arts quality printing. It is capable of producing 6,000 four-color (A4/letter) single-sided impressions per hour and can print on mixed stock at rated speed. The iGen3 with SmartPress Imaging Technology represents a dramatic improvement in dry ink printing. Single-pass printing allows the image to be assembled on a carrier and transferred to the page in one step. This produces quality color-to-color and image-to-paper registration. It can be networked through the CreoScitex front-end print server. The iGen3 is modular in design. It will be offered for sale to customers "custom configured" with various accessories (i.e. paper feeders, sorters, stapler-stackers, CreoScitex SCX Color Server, Print Station User Interface (Sun Microsystems PC with Xerox proprietary software), etc.). It does not incorporate a scanner.

This ruling concerns the classification of the "print engine" component of the product. It will not be imported with the CreoScitex SCX Color Server, Print Station User Interface or the various optional finishing units.

As imported, the iGen3 does not include a paper feeder, and there is no provision to hand feed the paper into the printer. Most accessories for the collection of the output of the printed documents are optional and are not imported with the iGen3. However, according to an April 19, 2005 submission from counsel for Xerox, “a stacker is required in order to effectively gather and segregate printed documents.” The ruling requests classification of the iGen3 if imported with the stacker accessory, as well as if imported without the stacker accessory.

The iGen3 connects to the central processing unit of an ADP system through the CreoScitex color server. The CreoScitex server is an ADP “control and adapter” unit, constructed on a personal computer (PC) platform, and utilizes Intel processors, and a Windows NT-based operating system. It is capable of processing digital images using a wide range of print languages, including but not limited to Adobe Postcript, pade definition format (PDF) Tagged Image File Format (TIFF), EPS and RTP.

In the descriptive literature, the iGen3 is referred to as a “Digital Production Press.” It is capable of printing 100 pages per minute (ppm) in both black and white and color, and has a monthly output volume range of 200,000 – 1,200,000 plus, pages. One of the properties listed under “key applications” in the “overview” section of the literature is “short-run, on demand printing of brochures, books. flyers, postcards, newsletters, catalogs, manuals, P-O-P materials, sell sheets and more.” Also in the “overview” section, the listed benefits of the iGen3 include, new business opportunities (longer short run digital color jobs, fast turnaround, personalized, customized communications), versatile, high quality print (print quality that rivals offset, wide array of stocks, weight and sheet sizes, mixed stocks in a single run), rapid turnaround of jobs, and reduced operating costs (elimination of warehousing costs and inventory disposal rates, automatic collation with offset stack delivery).

Our Internet research of digital short run, and print on demand printing, indicates that digital short run printing consists of 1000 copies of an item, or less. See www.digitaloutput.net/content/ContentCT.asp?P=86 (2005); http://americanprinter.com/mag/printing_short_story/ (2004). In traditional offset printing the minimum run lengths for printing is 750 to 1,250 copies. See www.digitaloutput.net/content/ContentCT.asp?P=86 (2005); www.aaronshep.com/publishing/BookPrinting/html (2005). Digital printing of short run lengths is more cost effective than offset printing. See id. Print on demand consists of digital printing only as needed to fill a specific customer order, which could be as little as one copy. See www.osi.hu/cpd/syndicate/printondemand.html (2000); www.aaronshep.com/publishing/BookPrinting/html (2005). Print on demand reduces inventory risks, by enabling limited or even zero warehousing of stock. See www.capv.com/home/Press/2002/10.01.02.html (2004); www.printingworld.com/technology/digital_printing/general/004.shtml (2000); www.digitaloutput.net/content/ContentCT.asp?P=86 (2005). Print on demand, distributed printing and personalization are capabilities unique to digital presses. See http://americanprinter.com/mag/printing_short_story/ (2004). In general, digital printing presses are characterized by features that ensure economical, reliable, fast, professional quality printing such as fast set up, continuous operation, fast speed/turnaround, high quality printing, use of a wide range of stock, weight and sheet sizes, use of mixed stock, and automatic collation with offset stack delivery, etc. Id.; www.kingprinting.com/ (2004).

The research in general shows that as the equipment for short run and print on demand printing has improved, the quality of print on demand has matched the print and binding quality of conventionally printed books, and many publishers have switched to print on demand for their shorter print runs. Short run on demand print allows the printing of books that would otherwise not be printed because in offset printing it is not cost-effective to print less than the standard minimum of books. Short run, on demand printing has become a specific category of the printing marketplace. A user report on www.printondemand.com, dated March 31, 2005, documents that a Pennsylvania and New York copy center business has installed an iGen3 in order to “grow its short-run color printing business and expand the company’s services for customers in the advertising, legal, marketing communications and real estate industries.”

ISSUE:

1. Whether the Xerox iGen3 print engine is classified as an automatic data processing machine printer unit under heading 8471, HTSUS, or as other office machines, printing machines, under heading 8472, HTSUS.

2. What is the classification of the Xerox part 156P14498 low voltage power supply under the HTSUS.

LAW AND ANALYSIS:

Merchandise is classifiable under the HTSUS in accordance with the General Rules of Interpretation (GRIs). The systematic detail of the HTSUS is such that most goods are classified by application of GRI 1, that is, according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. When the issue is based on competing subheadings, for purposes of determining the subheading, GRI 6 is applied. GRI 6 provides that "for legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and mutatis mutandis, to [rules 1 through 5], on the understanding that only subheadings at the same level are comparable."

The HTSUS subheadings under consideration for the iGen3 print engine are as follows:

8471 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included: 8471.60 Input or output units, whether or not containing storage units in the same housing: Other:
Printer units:
Assembled units incorporating at least the media transport, control and print mechanisms:
Laser:
8471.60.51 Capable of producing more than 20 pages per minute
Other:
Laser:
8471.60.61 Capable of producing more than 20 pages per minute..

8472 Other office machines (for example, hectograph or stencil duplicating machines, addressing machines, automatic banknote dispensers, coin-sorting machines, coin-counting or wrapping machines, pencil-sharpening machines, perforating or stapling machines):
8472.90 Other:
8472.90.80 Printing machines other than those of heading 8443 or 8471

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.

In NY I81178, it was determined that the iGen3 print engine was unfinished and not fully functional in its imported condition, and that it is the print engine which provides the essential character to the iGen3 Digital Production Press. Your submission asserts that the iGen3 print engine is complete in its condition as imported, and contains every component that it will require to perform its printing function. You further state that the print engine “needed merely to be connected to a computer in order to receive data from the computer to be used in the printing function.” However, in a submission dated April 2, 2002, and follow up made May 10, 2002, made with respect to the original ruling request submitted to the NCSD, you stated that the iGen3 is not imported with a modular paper feeder, and there is no provision to hand feed the paper into the printer.

In its condition as imported, whether imported with or without the stacker accessory, the iGen3 is unfinished, or incomplete, and not fully functional, because it does not have a paper feeder. Without a means of feeding paper into the unit, the iGen3 cannot print documents. GRI 2(a) provides, in pertinent part:

Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article.

In accordance with GRI 2(a), we conclude that the iGen3, as imported with or without the stacker accessory, has the essential character of the complete iGen3 printing press.

In your submission, you assert that the iGen3 satisfies all of the requirements set forth in Note 5(B) to Chapter 84, HTSUS, and therefore is appropriately classified in heading 8471, HTSUS. CBP has previously determined that machines similar to the iGen3, have the ultimate function to provide short run, digital, on demand printing. See e.g. HQ 965051, dated May 1, 2002. In HQ 965051, it was stated that short run, digital, on demand printing is a specific function other than data processing. As required by Note 5(E) to Chapter 84, HTSUS, machines, with a specific function other than data processing, working in conjunction with an ADP machine, are to be classified in the headings appropriate to their respective functions, or, failing that, in residual headings.

The application of Note 5(E) to Chapter 84, HTSUS, was discussed in HQ 957981, and HQ 959651, both dated July 9, 1997. Since the issuance of those rulings, additional language has been added to the Harmonized Commodity Description and Coding System Explanatory Notes (ENs), which supports the application of Note 5(E) in HQ 957981 and 959651. In understanding the language of the HTSUS, the ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). In EN 84.71(D), it is explained that:

An apparatus can only be classified in this heading as a unit of an automatic data processing system if it:

(i) Performs a data processing function;
(ii) Meets the criteria set out in Note 5 (B) to this Chapter, including the introductory paragraph of that Note; and (iii) Is not excluded by the provisions of Note 5 (E) to this Chapter.

Therefore, an apparatus can meet all of the criteria of Note 5 (B), yet may still be precluded from classification as a unit of an ADP system by Note 5(E).

In addition, EN 84.71(I)(D) states in pertinent part, with respect to the application of Note 5(D):

The foregoing provision is, however to be considered in the overall context of Note 5 to Chapter 84 and is therefore applicable subject to the provisions of paragraph (E) of that Note, by virtue of the introductory part of paragraph (B) thereof. Thus ink-jet printers working in conjunction with an automatic data processing machine but having, particularly in terms of their size, technical capabilities and particular applications, the characteristics of a printing machine, designed to perform a specific function in the printing or graphics industry (production of pre-press colour proofs, for example) are to be regarded as machines having a specific function classifiable in heading 84.43.

(Emphasis in original). While the iGen3 is not an ink-jet printer of heading 84.43, it has the characteristics of a digital production press for the printing industry.

In your December 10, 2004 submission, you assert that “’Short run on demand printing’ is not a phrase which describes a function other than data processing,” and that “[a]ll ADP printing is “’on demand’,” and “[v]irtually all of it is ‘short run’.” As indicated in the FACTS section, above, “short run, on demand printing” is a specific category of printing with a specific market in the printing marketplace. The term is used in the Xerox marketing literature for the iGen3, but is not used for its printers which are not suitable for “short run, on demand printing.” In the FACTS section, “short run on demand printing” is described as having a specific defined function. That function is the ability to economically print 1000 or less documents, for a customer order, with the unique capabilities of a digital press, including speed, volume output, use of a wide variety of stocks, and mixed stocks in a single run, and automatic collation. While all printers can print one document, not all are designed to routinely print 1000 document runs. In addition, CBP has previously concluded, in HQ 965051, supra, that “short run, on demand printing” is a function other than data processing. Accordingly, the iGen3, having a function other than data processing, is therefore precluded from classification under heading 8471, HTSUS.

In your December 10, 2004 submission, you cite to numerous NY ruling letters which classify a variety of multi-function copier/scanner/printers as units of ADP machines. In those rulings CBP applied GRI 3 (b) to determine the essential character of machines that could digitally reproduce documents scanned into memory, and print ADP output. The machines which were the subjects of the rulings you cited are however distinguishable from the iGen3, in that they functioned as stand-alone copiers with the additional abilities to scan and function as ADP printers, while the iGen3 does not have a scanner and is used as a short run on demand printer rather than as a standard digital copy machine.

The iGen3 is not described in heading 8443, HTSUS because it does not print by any of the means described therein. As the iGen3 is an office machine not more specifically provided for elsewhere, the iGen3 is properly classified under heading 8472, HTSUS. It is specifically provided for under subheading 8472.90.80, HTSUS, which provides for “[o]ther office machines: Other: Printing machines other than those of heading 8443 or 8471.”

The HTSUS subheadings under consideration for the 156P14498 power supply are as follows:

8504 Electrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: 8504.40 Static converters:
Power supplies for automatic data processing machines or units thereof of heading 8471: 8504.40.60 Suitable for physical incorporation into automatic data processing machines or units thereof of heading 8471
8504.40.95 Other.

Based on the conclusion above that the iGen3 is not an ADP unit of heading 8471, the 156P14498 power supply is not described in subheading 8504.40.60, HTSUS, as it is not a power supply for “automatic data processing machines or units thereof of heading 8471.” The 156P14498 power supply is classified instead in subheading 8504.40.95, HTSUS, as “[e]lectrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Static converters: Other.”

HOLDING:

By application of GRI 1, the imported iGen3 print engine is classified in heading 8472, HTSUS. It is specifically provided for under subheading 8472.90.8000, HTSUSA, which provides for “[o]ther office machines: Other: Printing machines other than those of heading 8443 or 8471,” with a column one “Free” general duty rate. By application of GRIs 1 and 6, the imported 156P14498 power supply is classified in subheading 8504.40.9580, HTSUSA, as “[e]lectrical transformers, static converters (for example, rectifiers) and inductors; parts thereof: Static converters: OtherOther,” with a column one, general duty rate of 1.5% ad valorem. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usits.gov/tata/hts/.

NY I81178, dated May 20, 2002, is affirmed.

Sincerely,

Myles B. Harmon, Director

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See also:

• Tariff No.: 8471.60.51 - Assembled ADP laser printer unit incorporating least certain mechanisms,not entered w/ rest of system,capable of more than 20 page/minute
• Tariff No.: 8471.60.61 - Other ADP laser printer units capable of more than 20 pages per minute, not entered with the rest of a system, nesoi
• Tariff No.: 8472.90.80 - Office printing machines other than those of heading 8443 or 8471
• Tariff No.: 8504.40.60 - Power supplies suitable for physical incorporation into automatic data processing machines or units thereof of heading 8471
• Tariff No.: 8504.40.95 - Static converters (for example, rectifiers), nesoi