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HQ W968075

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February 5, 2008

CLA-2 OT:RR:CTF:TCM W968075 HkP

CATEGORY: CLASSIFICATION

TARIFF NO.: 8504.40.95

Margaret M. Gatti, Esq.
Gatti & Associates
Attorneys at Law
44 Tanner Street
Haddonfield, NJ 08033

RE: DC to DC converters from China and Malaysia; reconsideration of NY L88686

Dear Ms. Gatti:

This is in response to a letter from your client, C&D Technologies, Inc. (“C&D”), dated December 14, 2005, requesting reconsideration of New York Ruling Letter (“NY”) L88686, dated December 1, 2005. The request for reconsideration was forwarded to this office for a response.

In reaching our decision, we also considered the arguments made in several telephone conversations between C&D and U.S. Customs and Border Protection (“CBP”) during February 2006; an additional submission made by C&D, dated March 9, 2006; a teleconference between yourself, C&D, and CBP on March 14, 2006; and, a submission dated April 18, 2006, made by you on behalf of your client. For the reasons set forth in this decision, we hereby affirm NY L88686. We apologize for our delay in responding to you.

FACTS:

The subject merchandise is direct current-to-direct current (DC-to-DC) converters, specifically products UWR-5/1000-D24, UWR-12/420-D24, UWR-15/335-D24 of the UWR series, and the entire WP06R series, manufactured by C&D. The converters measure approximately 1”x1”x 0.5”, are low power (5 watts), and are fully regulated and isolated. The UWR series of converters converts direct current input voltage ranges of 18-36V or 36-72V into 5V, 12V, or 15V direct current outputs, and the WP06R series converts direct current input voltage ranges of 9-18V, 18-36V, or 34-75V into 5V, 12V, or 15V direct current outputs. In NY L88686, CBP classified the DC-to-DC converters at issue in subheading 8504.40.95, Harmonized Tariff Schedule of the United States Annotated (“HTSUSA”), which provides for: “Electrical transformers, static converters (for example rectifiers) and inductors; : Static converters : Other.”

In the technical paper, The Data Processing Function, Primary Use and End-Use Applications of C&D Technologies’ UWR-Series and WP06 Series DC/DC Converters, by John Wanes, submitted as an appendix to C&D’s letter of March 9, 2006, DC-to-DC converters were described as follows:

DC to DC converters (also commonly known as “DC to DC power supplies”) are widely used in distributed power or intermediate buss architectures, where system voltages require conversion to a higher or lower voltage to power components such as microprocessors, memory chips, analog and other integrated circuits. Each electronic system may be composed of either individual electronic integrated circuits (ICs) or a collection of ICs and associated electronic components. Each system is designed to employ a system “buss voltage” which provides power to the systems constituent circuit boards which perform various signal and data processing functions.

Essentially, therefore, DC to DC converters convert high buss voltages to lower voltages that are suitable to power ICs.

According to the data sheets for the products at issue, the UWR models of converters are specifically designed for distributed power architectures in aerospace, marine, telecom and computer applications, while the WP06R series applications include telecommunications, battery powered systems, portable instruments, process control equipment, transportation equipment and distributed power systems.

In the original request for reconsideration (December 14, 2005), C&D asked CBP to reclassify the product at issue in subheading 8504.40.6001, HTSUSA, because C&D was of the opinion that the DC-to-DC converters were suitable for physical incorporation into automatic data processing (ADP) machines and they are rated at 5 Watts of power. C&D stated, “[a] review of HTS 8504.40.9580 makes it clear, however, that principal use in automatic data processing machines is not a requirement of this classification. Instead HTS 8504.40.9580 requires merely that the subject power supplies be suitable for physical incorporation into automatic data processing machines” (original emphasis, internal quotation marks omitted). In a March 9, 2006, submission to this office, C&D reiterated this belief and stated that “DC-to-DC converters are primarily used to power Integrated Circuit Chips (ICs) that perform automatic data processing functions in electronic systems.” Insofar as the DC-to-DC converters may also be required to power capacitors, resistors, inductors, or discrete semiconductor elements, C&D argued that these components are passive, the sole purpose of which is to support the data processing ICs by insuring the reliability of the intended functions by means of signal protection, signal scaling and other methods. However, C&D argued, the fact that the DC-to-DC converters also power other electronic components does not lead to the conclusion that the converters have a principal function other than powering ICs.

During our teleconference on March 14, 2006, we directed C&D’s attention to Legal Note 5 to Chapter 84, which defines an ADP machine and system for tariff purposes, as well as to Legal Note 5 (now, Note 8, HTSUS (2008)) to Chapter 85, which defines, among other things, electronic integrated circuits.

Based on your April 18, 2006, submission to this office, it is now C&D’s view that the converters at issue are properly classified under heading 8542, HTSUS, specifically in subheading 8542.39.0000, HTSUSA (2008), “electronic integrated circuits, other”, (formerly, 8542.60.0095, HTSUSA, “hybrid integrated circuits, other”) because they meet the requirements of Legal Note 8(b) (formerly, Note 5(b)) to Chapter 85, HTSUS (2008). However, C&D also believes that classification under heading 8542 is correct because the “converters are circuit-board mounted power supplies that power integrated circuits in electronic assemblies. As such, they represent parts of integrated circuits and are subject to classification in accord with HTS Section XVI Note 2”, that is, in subheading 8542.90.0000, HTSUSA. In addition, it is now C&D’s position that heading 8504 does not specifically provide for DC-to-DC converters.

ISSUE:

What is the correct classification of the DC-to-DC converters?

LAW AND ANALYSIS:

Classification under the HTSUS 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 2 through 6 may then be applied in order.

The subheading under which you claim classification, 8542.60.0095 (hybrid integrated circuits, other) became 8542.39.0000 (electronic integrated circuits, other) under the 2007 HTSUS, effective February 3, 2007*

* Pursuant to title 19 United States Code, Section 3005, the Harmonized Tariff Schedule of the United States was amended to reflect changes recommended by the World Customs Organization. The proclaimed changes are effective for goods entered or withdrawn from warehouse for consumption on or after February 3, 2007. See Presidential Proclamation 8097, 72 FR 453, Volume 72, No. 2 (January 4, 2007). . In addition, Legal Note 5 to Chapter 84, which defines ADP units, was non-substantively amended and Legal Note 5 to Chapter 85 was renumbered as Legal Note 8 to that chapter.

The 2008 HTSUS provisions under consideration 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; power supplies for goods of subheading 8443.31 or 8443.32; power supplies for monitors of subheading 8528.41 or 8528.51 or projectors of subheading 8528.61: 8504.40.60 Suitable for physical incorporation into automatic data processing machines or units thereof of heading 8471 ... Other ..

8542 Electronic integrated circuits; parts thereof: Electronic integrated circuits:
8542.39.0000 Other ..

Legal Note 5 to Chapter 84, HTSUS, provides, in relevant part:

(A) For purposes of heading 8471, the expression "automatic data processing machines" means machines capable of:

(i) Storing the processing program or programs and at least the data immediately necessary for execution of the program; (ii) Being freely programmed in accordance with the requirements of the user; (iii) Performing arithmetical computations specified by the user; and, (iv) Executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run. (B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units.

(C) Subject to paragraphs (D) and (E) below, a unit is to be regarded as being a part of a complete system if it meets all the following conditions:

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

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

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

Legal Note 2 to Chapter 85, HTSUS, provides, in relevant part: “Headings 8501 to 8504 do not apply to goods described in heading 8511, 8512, 8540, 8541 or 8542.”

Legal Note 8(b) to Chapter 85, HTSUS, provides in relevant part:

“Electronic integrated circuits” are:

(ii) Hybrid integrated circuits in which passive elements (resistors, capacitors, inductances, etc.) obtained by thin- or thick-film technology, and active elements (diodes, transistors, monolithic integrated circuits, etc.) obtained by semiconductors technology, are combined to all intents and purposes indivisibly, by interconnections of interconnecting cables, on a single insulating substrate (glass, ceramic, etc.). These circuits may also include discrete components.

For the classification of articles defined in this note, headings 8541 and 8542 shall take precedence over any other heading in the Nomenclature, except in the case of heading 8523, which might cover them by reference to, in particular, their function.”

It is your view that the converters at issue are classifiable as hybrid integrated circuits under heading 8542, HTSUS. You cite Notes 2 and 8(b) (previously, Note 5(b)) to Chapter 85, HTSUS, as well as NY K83213, dated March 10, 2004, as justification for this position.

In your April 18, 2006, submission you informed CBP that “[t]he design and manufacture of Ericsson’s DC to DC converters, as described in Ruling #NY K83213, is virtually identical to the design and manufacture of C&D’s DC to DC converters. Ericsson’s converters (namely, the PKM, PKL, PKJ and PKB series) are manufactured on Fire Retardant, Level 4 printed circuit board (PCB) material onto which capacitors, resistors, diodes, transistors, integrated circuits and other parts are soldered.”

In order to be considered a “hybrid integrated circuit”, Note 8(b) to Chapter 85, HTSUS, requires (1) the passive elements to be obtained by thin- or thick- film technology, and (2) the active elements to be obtained by semiconductor technology. We find that the DC-to-DC converters at issue are not hybrid integrated circuits because their passive elements are not manufactured using thin- or thick- film technology. They also do not conform to any other definition of “electronic integrated circuit” provided by Note 8 to Chapter 85. In addition, we note that NY K83213 was revoked by HQ W968273, dated October 12, 2006, because it incorrectly classified DC-to-DC converters as hybrid integrated circuits. We incorporate by reference the Law and Analysis of HQ W968273 into this ruling.

Further, we find that the converters cannot be classified as “parts” suitable for use solely or principally with integrated circuits because in addition to powering integrated circuits they are also generally used to power capacitors, resistors, inductors and other discrete semiconductor elements. Note 2(a) to Section XVI provides, in relevant part, that “parts which are goods included in any of the headings of chapter 84 or 85 are in all cases to be classified in their respective headings.” Accordingly, Note 2(a) precludes classification of the converters under heading 8542 as a “part”, if they are described by the terms of a heading.

C&D has noted that on many occasions in the past, CBP has classified DC-to-DC converters under heading 8504, HTSUS. However, you contend that the DC-to-DC converters at issue are not classifiable in heading 8504, HTSUS, because they are not rectifiers or inductors and therefore are not specifically included in that heading.

Heading 8504, HTSUS, is an eo nomine provision for, “electrical transformers, static converters (including rectifiers) and inductors”. It is a well-established classification principle that eo nomine provisions usually include all forms of the named article unless specifically excluded. Nootka Packing Co. v. United States, 22CCPA 464, T.D. 47464 (1935).

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 at the international level. See T.D. 89-80. Explanatory Note 85.04 (II)(D) explains that direct current converters, by which direct current is converted to different voltages, are included in the group “electrical static converters”. DC-to-DC converters are within the terms of heading 8504, as indicated by EN 85.04 (II)(D), and consequently must be classified under heading 8504, HTSUS, as if provided for by name. We find that your argument precluding classification under heading 8504, HTSUS, is unpersuasive.

The remaining subheadings in contention are both under heading 8504, HTSUS. GRI 6 provides that 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 GRIs 1 through 5, on the understanding that only subheadings at the same level are comparable. GRI 1, by application of GRI 6, requires us to classify merchandise according to the terms of the subheadings.

You contend that the converters should be classified in subheading 8504.40.6001, HTSUSA, because they are suitable for physical incorporation into ADP machines or its units. In its ruling request of October 31, 2005, C&D stated, “the converters are designed to be principally used in computers as well as any device, equipment or system which uses a microprocessor (more specifically, on circuit boards which are installed in such devices), which all are essentially automatic data processing systems.” In a letter dated December 14, 2005, C&D stated further:

The ruling request indicates C&D’s belief that HTS 8504.40.6001 is the appropriate HTS number for C&D’s DC to DC Converters because its DC to DC Converters are rated at 5 Watts of power and because they are suitable for physical incorporation into automatic data processing machines. because in accord with General Rule of Interpretation 3A, this was the most specific description of the DC to DC Converters.

Subheading 8504.40.60, HTSUSA, is comprised of two parts, a superior subheading (“power supplies for automatic data processing machines or units thereof of heading 8471”) and the tariff rate line (“suitable for physical incorporation into automatic data processing machines or units thereof”); subheading 8504.40.6001 is a statistical breakout based on watts of power. In order to be classified under subheading 8504.40.60, a device must first meet the terms of the subheading superior to the tariff rate line and then meet the description provided in the tariff rate line. Only then can it be classified at the 10-digit subheading level.

C&D has argued that subheading 8504.40.60 is not a principal use provision. However, we find that this assertion is contrary to the language of the subheading, in that, the defining feature of the devices in the superior subheading is implied by their use. Additional U.S. Rule of Interpretation 1(a) states that, in the absence of special language or context which otherwise requires, a tariff classification controlled by use (other than by actual use) is to be determined is accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use. The Court of International Trade has stated that principal use is the use “which exceeds any other single end use”. Minnetonka Brands, Inc. V. United States, 24 CIT 645, 651, 100 F. Supp. 2nd 1020, 1027 (2000). According to the submitted information:

C&D sells the majority of its UWR and WP06 power supplies to Original Equipment Manufacturers (OEMs) of electronic products which incorporates them into a wide variety of products and applications C&D customers include OEMs of telecommunication equipment, computer and networking equipment, office equipment, military equipment, industrial automation systems and test instrumentation.

More generally, our research on the Internet revealed that DC-to-DC converters are used to power capacitors, resistors and discrete semiconductor components, among other things, and have no principal use. In light of these facts, we find that the DC-to-DC converters are precluded from classification in subheading 8504.40.6001 because they are not principally used as power supplies for ADP machines or for units of ADP machines. In addition, ADP systems and units of such systems are specifically defined by Note 5 to Chapter 84. According to the submitted information, the converters at issue are used to power printed circuit boards (“PCBs”), not ADP machines or ADP units.

In light of these facts, we conclude that the DC-to-DC converters are precluded from classification in subheading 8504.40.6001, HTSUSA, on two grounds. One, they have no principal use and two, they are not power supplies for units of ADP machines. We find that the converters are properly classified as “other” static converters of subheading 8504.40.95, HTSUSA.

HOLDING:

By application of GRI 1 and GRI 6, the subject DC-to-DC converters are classified in heading 8504, and are specifically provided for in subheading 8504.40.95, HTSUSA, which provides for: “Electrical converters, static converters (for example, rectifiers) and inductors; parts thereof: Static converters: Other.” The column one, general rate of duty is 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.usitc.gov.

EFFECT ON OTHER RULINGS:

NY L88686, dated December 1, 2005, is hereby affirmed.

Sincerely,

Myles B. Harmon, Director Commercial and Trade Facilitation Division


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See also:

• 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
• Tariff No.: 8542.39.00 - Electronic integrated circuits, NESOI
• Tariff No.: 8542.60.00 - Electronic hybrid integrated circuits
• Tariff No.: 8542.90.00 - Parts of electronic integrated circuits and microassemblies