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HQ 967524




March 22, 2005

CLA-2 RR:CR:GC 967524 DSS

CATEGORY: CLASSIFICATION

TARIFF NO.: 8543.89.2000

Mr. Richard Ingrao
Expeditors Tradewin, LLC
11101 Metro Airport Center Drive
Bldg. M2, Suite 110
Romulus, MI 48174

RE: Ruling Request for CD/DVD Finishing Machines from Sweden

Dear Mr. Ingrao:

In your letter to the Director, National Commodity Specialist Division (NCSD), New York, dated November 22, 2004, on behalf of M2 America Corporation, you inquire as to the classification of two models of CD/DVD finishing machines under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Your letter was forwarded to this office for reply. The classification of the finishing machines is set forth below.

FACTS:

According to the information submitted, the articles are optical disc finishing machines, model numbers SQ1 Multiformat CD/DVD5 Finishing Machine (SQ1) and SQ2 DVD9 Finishing Machine (SQ2). Model SQ1 consists of handling and processing stations that receive a clear molded compact disc (CD) or digital versatile disc (DVD) and perform the processes required to make the discs playable and ready to be printed and packaged. All stations are integrated into one unit/housing for both models. The molding, printing, and packaging processes are not part of these machines, however, the machines integrate with the customer’s choice of any CD/DVD molding machine on the market.

The SQ1 is designed to process CDs, however, with certain options, it can be upgraded to process DVDs. For CD finishing, the SQ1’s components consist of a cooling buffer that allows the molded disc substrate to cool prior to finishing; a metalizer station that utilizes sputtering technology to apply a thin film of reflective metal on the disc surface in order to make the disc playable; a coating station (spincoating) that applies a protective lacquer coating on the metal film; an ultraviolet (UV) light curing station that cures the protective lacquer; a scanning station that checks the discs for production flaws; and a receiver station that stacks the finished discs.

For DVD finishing, the SQ1’s components consists of a cooling buffer; a metalizer station; a bonding station that applies an adhesive to bond two substrates together to form a single DVD disc; a UV curing station that cures the adhesive; a scanner station; and a receiver station.

The model SQ2 performs the same functions for DVD finishing as does the model SQ1, however, it does not have a CD finishing capability. It is marketed as producing the highest quality DVDs at the lowest cost per disc.

ISSUE:

Whether the instant CD/DVD finishing machines are classified as articles of heading 8479, HTSUS, which provides for machines and mechanical appliances having individual functions, not specified or included elsewhere in chapter 84, or as articles of heading 8543, HTSUS, which provides for electrical machines and apparatus, having individual functions, not specified or included elsewhere in chapter 85.

LAW AND ANALYSIS:

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined 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 may then be applied.

The HTSUSA provisions under consideration are as follows:

8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and mechanical appliances: Other:
Other:
Other:
Other.

8543 Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter: Other machines and apparatus:
8543.89 Other:
Physical vapor deposition apparatus:
8543.89.2000 Other.

Note 3 to Section XVI, HTSUS, states, “[U]nless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed 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 Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTSUSA and are thus useful in ascertaining the classification of merchandise under the System. The Bureau of Customs and Border Protection (CBP) believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

You claim the SQ1 and SQ2 models are composite machines as described in Note 3 to Section XVI, HTSUS. You note that the EN to Note 3 to Section XVI, states that composite machines are taken to be fitted together to form a whole when incorporated one in the other or mounted one on the other, or mounted on a common base or in a common housing. You claim that the SQ1 and SQ2 models are classified under subheading 8479.89.9897, HTSUSA, based in large part on Headquarters Ruling Letters (HQs) 961441, dated June 10, 1999, and 962000, dated June 15, 1999. You also claim that there is no evidence the machines are used for the manufacturing of video laser discs as provided for in subheading 8479.89.84, HTSUS.

Furthermore, you confirmed in a December 9, 2004 telephone conversation that the discs entering the machines already have the data on them in the form of ridges and grooves. Thus, the machines are not processing blank discs. You also confirmed that in the opinion of the importer, the key process is the application of the reflective layer by sputtering or physical vapor deposition (PVD), which would allow the laser to read the ridges and grooves as data.

In HQ 961441, CBP classified the “Multiliner,” a machine in the optical disc manufacturing process, under subheading 8479.89.9895 (now 8479.89.9897), HTSUSA. The components of the Multiliner include lacquering, curing and metalizing units, as well as scanning and handling units. All components, except for the control, are enclosed in the same housing. The ruling noted that the components are fitted together to form a whole and therefore are considered a composite machine for purposes of Note 3 to Section XVI.

In HQ 962000, CBP classified the “Miniliner” machine under 8479.89.9897, HTSUSA. The Miniliner sputter coats a plastic substrate with a thin layer of aluminum, lacquers the substrate and dries or UV cures it. The Miniliner was also considered to be a composite machine for purposes of Note 3 to Section XVI. In both HQ 961441 and HQ 962000, the metalizing or sputtering was the principal function.

Similar machinery used in the mastering and replication of DVDs was classified in HQ 961210, dated April 2, 1999. In that ruling, a range of machines used in the mastering and replication of DVDs was classified in various headings. Certain machines were found to be composite machines and were classified according to their principal function, which was sputter coating. The relevant machines cleaned the disc substrates and sputter coated the disc substrates with aluminum. These machines were classified under subheading 8479.89.85, HTSUS.

Similar to HQs 961441, 961210 and 962000, the literature provided depicts the components of the SQ1 and SQ2 as being within a common housing and being fitted together to form a whole. Thus, the SQ1 and SQ2 are considered to be composite machines for tariff purposes, as defined by Note 3 to Section XVI, and are classified according to their principal functions.

Pursuant to Note 3, we have determined the principal function of both the SQ1 and SQ2 is the sputtering or metalizing function. As was stated in HQ 962000, “During playback, it is the aluminum that reflects the low-power laser that “reads” the signals encoded on the disc’s surface and allows the disc to play.” We find that to be the case in this instance, as well. In HQs 961441, 962000 and 961210, because no tariff heading in the HTSUS specifically described the function the sputter coater performed, the machines fell under heading 8479, HTSUS, which provides for “Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter . . . .” However, such sputtering apparatus or devices are no longer classified under heading 8479, HTSUS.

Effective January 10, 2002, the HTSUS was amended to conform to the amendments made to the International Convention on the Harmonized Commodity Description and Coding System for 2002. See Presidential Proclamation 7515, 66 Fed. Reg. 66549, Vol. 66, No. 247 (Dec. 26, 2001), paras. (1) and (9)(a). As a consequence of a World Customs Organization (WCO) decision (see Annex H/11 to Doc. 42.100 E and Annex K/22 to Doc. 42.750), the HTSUS was modified so that sputtering machines imported into the United States, from that date on, are classified under subheading 8543.89, HTSUS, and parts of such machines are classified under subheading 8543.90, HTSUS. Accordingly, HQs 961441, 961210, and 962000 were modified by operation of law on the effective date of the amendment, January 10, 2002, pursuant to 19 C.F.R. 177.12(d)(1)(i).

Sputtering or sputter coating is a function not described in any heading of chapter 85, HTSUS, therefore, the instant finishing machines fall in heading 8543, HTSUS. Furthermore, EN 85.43 states, in pertinent part:

The heading includes, inter alia:

(17) Apparatus for physical vapour deposition of metal by means of a magnetron, used, inter alia, in the manufacture of integrated circuits (emphasis in original).

The literature provided by the importer indicates that the metalizing function performed by the SQ1 and SQ2 is achieved through physical vapor deposition of a metal by means of a magnetron. As such, the machines’ primary function is not described in any of the other headings of chapter 85, HTSUS, and thereby meets the terms of heading 8543, HTSUS.

Therefore, according to the information provided, the SQ1 and SQ2 finishing machines are composite machines for tariff purposes, and according to Note 3 to Section XVI, are classified by their principal function. The principal function of the machines is metalizing or sputtering the discs, which falls in heading 8543, HTSUS. The machines are classified under subheading 8543.89.2000, HTSUSA, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter . . . : Other machines and apparatus: Other: Physical vapor deposition apparatus: Other.”

HOLDING:

The instant SQ1 and SQ2 CD/DVD finishing machines fall under heading 8543, HTSUS. They are classified under subheading 8543.89.2000, HTSUSA, as “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter . . . : Other machines and apparatus: Other: Physical vapor deposition apparatus: Other.” The 2005 column one, general rate of duty is 2.5 percent 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 World Wide Web at www.usitc.gov.

Sincerely,

Myles B. Harmon, Director

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