H006980
                    
August 20, 2008

CLA-2 RR: CTF: TCM H006980 EMS

CATEGORY: Classification

TARIFF NO.: 9010.10.0000 and 9010.50.6000

Barbara Kiefer, National Import Specialist
National Commodity Specialist Division
U.S. Customs and Border Protection
One Penn Plaza, 10th Floor
New York, NY 10119

RE:     Internal Advice on the Tariff Classification of the Fuji Film Processor Models FP563SC and FP150SC; Laser Printer Models LP5000, LP5500, LP5700 and LP 5900; and, Scanner Models SP3000 and SP500

Dear Ms. Kiefer:

This is in reference to correspondence from Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Counsel) dated February 16, 2007, on behalf of FUJIFILM U.S.A., Inc. The correspondence contained a request for a binding ruling on the tariff classification of certain models of film processors, laser printers, and scanners under the Harmonized Tariff Schedule of the United States (HTSUS). The models at issue are the subject of ongoing customs transactions, and we are responding with an internal advice pursuant to 19 C.F.R. § 177.11. On January 17, 2008, CBP held a teleconference meeting during which Counsel presented further arguments concerning this request.

FACTS:

FUJIIFILM U.S.A., Inc. (Fuji) imports certain models of film processors, laser printers, and scanners for use in commercial photographic applications. Fuji imports these units from Fujifilm, Ltd., its parent corporation in Japan. The three units are imported together in the same shipment “only as a consequence of the fulfillment of orders for multiple goods by the vendor, Fujifilm, Ltd.” These units are “always independently packaged and are shipped to the United States in varying quantities (i.e., no correlation exists among the ordering of one or the others and, thus, in the absence of remote coincidence, quantities always differ).” Each of the three units is “ultimately sold by Fuji for use with or without other Fuji units depend[ing] upon the order requests of the end user [U.S. customer].” These units are “[idenitifed] under independent product codes and separately maintained inventories.”
Fuji’s website identifies the film processors (FPs), laser printers (LPs), and scanners (SPs) as commercial photofinishing products. Fuji explains that the same shipments which contain these three devices also may include other devices which perform their own separate functions and also perform other functions in conjunction with these units. For example, digital cameras and photo kiosks may be included in the same shipments. Fuji has not provided any additional information on these devices.

Film Processor (FP) Models FP563SC and FP150SC

    Fuji markets the FP563SC model of this unit as part of its “Advanced Photo System” product line. Fuji did not provide any descriptive information for the FP150SC model. Fuji describes both models as “stand alone conventional film processor[s] that develop[] a variety of conventional films [into negatives], utilizing a dedicated chemistry that cannot be used to process photographic paper.” Fuji states that the FP has “no application whatsoever with respect to digital images[,]” and points out that it is not marketed with the LPs or SPs in Fuji’s commercial literature. Fuji also alleges that the sales of FPs are on the decline, but that “[t]here are still occasions where the LP, FP and SP devices are ordered by U.S. customers in conjunction, but these are almost exclusively for new store openings of the large-retail type (e.g., Wal-Mart) where all photo-services, including film development, digital conversion and photo printing and reproduction, are offered.”

Laser Printer Models LP5000, LP5500, LP5700, and LP 5900

    Fuji markets each of these models both separately and as a part of its “Digital Lab System” product line. The commercial literature for this product line also includes the different models of SPs that are used in conjunction with LPs to scan the images into a digital form that can be transmitted to and printed by the LPs. According to Fuji, “[t]here is electronic compatibility” between the LP and the SP: “the electronic byproduct [from the SP] …can be fed via cable directly to the [LP] for reproduction of hard prints …. This same compatibility does NOT exist with respect to one of these devices and a non-Fujifilm version of the other (e.g., Fujifilm [LP] and non-Fujifilm [SP]).” Fuji generally describes the LP as “a versatile laser based printer that is sold as a stand-alone product or for use with a variety of computers, scanners or monitors, including the Fuji SP.”

In addition to accepting digitized images transmitted by the SP, the LP is capable of printing images from digital photo kiosks (which interface with recording media for digital cameras); and, as a stand-alone unit, the LP can print images from digital media such as flash cards, CDs, and zip drives. Fuji alleges that the LP printers are increasingly purchased and used in a stand-alone capacity by commercial establishments that have “converted to digital photography for speed, elimination of the development stage, and ease of picture modification.” The LP uses lasers to expose the images, which are chemically processed and printed onto photosensitive paper. The marketing information recommends the use of Fujifilm’s Paper Type II, a silver halide paper.
Scanner Models SP3000 and SP500

    According to Fuji, these models of SPs are “sold as stand-alone products for use with a variety of computers, viewers, monitors or printers, or for use with Fuji’s LP printer[s].” The commercial literature provided by Fuji for the scanner consists only of its marketing material for the “Digital Lab System” product line, which also includes the different models of the LP that are used in conjunction with the SP to print the images that are scanned and digitized by the SPs. Fuji generally describes the SP as a scanner that is “designed to scan frames of conventionally developed film or slides, without the use of any other machine, and convert them into a digital file format.” According to Fuji, the SP is used “for [the] creation of photos from negatives after digital conversation.” Film developed by the FP must be manually fed into the SP.

    In addition to transmitting digitized images to the LP, the SP can function independently to perform a “conversion service [,]” which is explained by Fuji as “[the conversion of] analog pictures to digital images for storage on discs, memory cards and other digital media.” Fuji alleges that the usage of the SP and the LP together is becoming “increasingly common.” Based on the marketing materials, and according to Fuji, the SP and the LP are sold together and these devices share the unique electronic compatibility identified in the description of the LP on page 2 of this letter.

ISSUE:

    Whether the film processors, scanners, and printers are classifiable as functional units pursuant to Note 4 to Section XVI and Note 3 to Chapter 90 when these articles are imported in the same shipment?

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. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and mutatis mutandis, to the GRIs 1 through 5.
The HTSUS provisions under consideration are the following:

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:
            
                * * * * *

8471.90.0000        Other

* * * * *
                        
9010    Apparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof:

9010.10.0000    Apparatus and equipment for automatically developing photographic (including cinematographic) film or paper in rolls or for automatically exposing developed film to rolls of photographic paper
            
9010.50    Other apparatus and equipment for photographic (including cinematographic) laboratories; negatoscopes:

            * * * * *
9010.50.6000            Other

Note 4 to Section XVI provides for the classification of combinations of machines as a “functional unit”:

Where 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.

Note 3 to Chapter 90, HTSUS, states that the provisions of Note 4 to Section XVI apply to Chapter 90. CBP classifies separate machines as functional units when the following criteria are satisfied: (1) all of the machines contribute to a clearly defined function; (2) the heading appropriate for that function is of chapter 84, 85, or 90; (3) all of the machines are intended to contribute to that function.

    A function is "the activity appropriate to the nature or position of a thing." ABB Power Transmission v. United States, 19 Ct. Int’l Trade 1044, 1050 (1995) (citing Webster's Third New International Dictionary (1993); and, defining the function of a thyristor or semiconductor device as “the activity they perform.”). The FP, SP, and LP can function together to perform a specific activity. The image captured on raw film can be developed by the FP and then converted to a digital image by the SP. The SP transmits the digital image to the LP, which prints photographs of those images. The clearly defined function of the FPs, LPs, and SPs, together, is to process images captured on raw film in photographic prints. The heading appropriate to this clearly defined function is heading 9010, HTSUS, which provides for “[a]pparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof.” Cf. HQ 957681, dated June 26, 1995 (classifying self-contained photofinishing laboratories that develop raw photographic film and print photographs of those images in subheading 9010, HTSUS).
Neither “photographic” nor “laboratories” is defined within the HTSUS for purposes of Chapter 90. In the absence of contrary legislative intent, tariff terms are to be construed in accordance with their common and commercial meanings which are presumed to be the same. The term “photographic” is an adjective derived from the noun “photography.” In HQ 958054, dated September 26, 2005, CBP examined various dictionary definitions in reaching its determination that “photography” means “[t]he art or process of producing images on sensitized surfaces by the action of light or more generally, of any form of radiant energy.” CBP has also addressed the scope of the term “laboratories” in heading 9010, HTSUS, finding that it is also broadly defined. In HQ 083123, dated December 18, 1989, CBP determined that the term “laboratories” in heading 9010, HTSUS, does not restrict the scope of this heading to photographic apparatus and equipment that is used in a particular place. For example, in HQ 963869, dated April 17, 2001, CBP concluded that “the creation of a digital file, the imaging or printing of that file on the Lambda 130, the sending of the image to a paper processor, and the production of a final print” are the equivalent of “laboratory work” of heading 9010, HTSUS.

When imported together, the FPs, LPs, and SPs are properly classified as functional units in heading 9010, HTSUS, pursuant to Note 4 to Section IV and Note 3 to Chapter 90, and specifically in subheading 9010.10.0000, HTSUS, which provides for “Apparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof: Apparatus and equipment for automatically developing photographic (including cinematographic) film or paper in rolls or for automatically exposing developed film to rolls of photographic paper.” The functional unit in this case performs both of the functions described in the subheading.

The gravamen of Fuji’s objection to the classification of the FP, SP, and LP as functional units is that there is no “intent[] to contribute together to a clearly defined function.” This objection stems from the alleged commercial reality that the machines are not actually used together to print photographs. Fuji cites the stand-alone capabilities of each machine, and alleges circumstances of sales that suggest that Fuji’s customers do not purchase these machines for use together. The only supporting evidence provided to CBP consisted of the marketing materials described in the FACTS section of this letter.

Taking into account the content of the marketing materials and Counsel’s arguments, Fuji’s position regarding the use of these machines is not persuasive. Note 4 to Section XVI does not require actual use of machines to achieve the function as a whole. See HQ 961139, dated April 6, 1998. CBP has repeatedly held that, “[i]t is enough that, in their condition as imported, the goods are intended to contribute together to a clearly defined function,” HQ 961139, and, at best, the principal use of the machines may be evidence of “intent.” The fact that machines may not be exclusively or principally used together is not proof of the absence of “intent” within the meaning of Note IV to Section XVI. HQ 961139. In the instant case, the multifunctional nature of the LPs and SPs does not preclude a finding that they are intended to contribute a clearly defined function.

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) describe the scope of the intent requirement. The ENs constitute the official interpretation of the Harmonized System. While not legally binding on the contracting parties, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the Harmonized System. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). Part (VII) of the General ENs to Section XVI define the phrase “intended to contribute together to a clearly defined function.” In relevant part, the ENs to Section XVI state the following:
For the purposes of this Note, the expression "intended to contribute together to a clearly defined function" covers only machines and combinations of machines essential to the performance of the function specific to the functional unit as a whole, and thus excludes machines or appliances fulfilling auxiliary functions and which do not contribute to the function of the whole.

This definition also applies to functional units of Chapter 90 pursuant to Part (IV) of the General ENs to Chapter 90. Neither the stand-alone capabilities nor the principal use of these machines controls whether any one is essential to the performance of the functional unit as a whole, i.e., the developing of raw film into photographic prints. When the source of an image is raw film, all three machines are essential to the printing of the image on photographic paper.

Within the context of the ENs, the requirement that articles classifiable as functional units must be “essential” to the function specific to the functional unit as a whole is intended to exclude from “essential” those machines “fulfilling auxiliary functions and which do not contribute to the function of the whole.” (emphasis added). For example, CBP has previously addressed the classification of machines as a functional unit when only the output device performs the function which is clearly defined in the appropriate heading of the HTSUS. In HQ 963651, dated October 11, 200, CBP determined that a folding machine and a bagging machine constituted a functional unit classifiable in heading 8442, HTSUS, as “other packing or wrapping machinery.” Even though the folding machine did not itself wrap or pack the merchandise, CBP found that it contributed to this function because “folding is a necessary step to preserve the form and shape of the pantyhose for presentational purposes, prior to being final packaged.” In the instant case, all three machines are essential to process images captured on raw film into photographic prints. The FP must develop the raw film, which must be converted to digital format by the SP in order for the LP to print the photograph of the image originally captured on the raw film.


Separate machines that can be used together in sequential operations are presumed to be “intended” for such use when imported together. For example, in HQ 966109, dated November 24, 2003, CBP classified cleaning tanks, electrolytic degreasing and rinsing tanks, and copper coating tanks that were imported together as a functional unit under heading 8463, HTSUS, which provides for, among other things, machines for working wire. These separate machines performed different steps of manufacturing, but all were used together in a sequential fashion to produce welded wires. CBP explained that because of their related functions, those machines could be considered, prima facie, to comprise a functional unit. Likewise, in the instant case, CBP finds that the FPs, LPs, and SPs constitute functional units, when imported together, because of their related functions, i.e., the separate steps that each performs is intended to contribute to the development of raw film into printed photographs. The relationship is underscored by Fuji’s statement that on rare occasions some large retail stores do purchase all three machines for use together.
    
The classification of the FPs, LPs, and SPs as functional units is consistent with CBP’s decision in NY J88593, dated September 3, 2003. In that case, CBP classified certain photoprocessors, scanners, and printers imported together as functional units of heading 9010, HTSUS, because these articles could function together to develop raw film into printed photographs. Fuji concedes that the FPs, LPs, and SPs at issue in the instant case “are similar in general function and description to the goods in NY J88593[,]” but alleges that “the context of shipment and commercial application of the equipment herein [the instant case] is wholly dissimilar.” These distinctions may establish the principal use of the FPs, LPs, and SPs, but they are not persuasive in the classification of these machines as a functional unit pursuant to Note 4 to Section XIV for the reasons set forth below.

The relevant context of the shipment of the FPs, LPs, and SPs is its condition upon importation, and not upon the basis of what their condition may become after they enter the United States. See, e.g., United States v. Citroen, 223 U.S. 407 (1911); Simod Am. Corp. v. United States, 872 F. 2d 1572 (Fed. Cir. 1989). The FPs, LPs, and SPs are included in the same shipment. The fact that these machines are identified by independent product codes, maintained in separate inventories, and separately packaged does not preclude their classification as a functional unit. See, e.g., HQ 961139 (concluding that that separate palleting and invoicing of machines contained in the same shipment did not preclude classification as functional units). Like the merchandise described in NY J88593, the FPs, LPs, and SPs satisfy the criteria of Note 4 to Section XVI in their condition as imported. While NY J88593 did not address the relevance of varying quantities of different units which constitute a functional unit pursuant to Note 4 to Section XVI, CBP addressed this disparity in HQ 961139, finding that a shipment with equal numbers of the machines which constitute a functional unit are to be classified as functional units. Accordingly, the fact that Fuji never imports the FPs, LPs, and SPs in the same quantities is not germane to the correctness of the classification of equal numbers of these machines as functional units.

The alleged commercial applications of the FPs, LPs, and SPs do not preclude their classification as functional units. As explained above, supra pages 5-6, these units are intended to contribute together to a clearly defined function. Evidence which supports this “intent” is sufficient for classification as a functional unit pursuant to Note 4 to Section IV. The fact that these machines have independent, stand-alone functions does not negate the existence of that requisite intent, nor do Fuji’s allegations concerning the nature of the post-importation sales and the use of the machines by its customers. Cf. NY J88593 (concluding that classification as a functional unit was appropriate for the printers, scanners, and film processors, even though the printers and scanners were sold with photo processing machines other than the one with which they were imported.)

With respect to the commercial application of the FPs, it is noteworthy that Fuji has alleged a significant decline in orders for the FPs, as opposed to the LPs and SPs. This suggests a scenario where Fuji’s shipments may consist of quantities of SPs and LPs that exceed the quantity of FPs. CBP notes that in the absence of an FP, the SP and the LP also constitute a functional unit . These two machines function together to print digital images into photographs. The SP converts an image to digital format and transmits that image to the LP, which prints a photograph. The LP and the SP are specifically marketed together as digital labs systems in the literature provided by Fuji, and Fuji has explained to our office that the two machines can even operate together with no manual intervention when they are interconnected by a cable. CBP notes that the absence of the cable which connects the two units together in a given shipment does not affect the classification of the LPs and SPs as functional units. See, e.g., HQ 967142, dated September 17, 2007 (“Given the relationship between GRI 1 and GRI 2(a) in determining the scope of the headings, GRI 2(a) may also be applied to determine whether under GRI 1 a series of machines or components may qualify for classification under Section XVI, Note 4, even if imported incomplete or unfinished.”).

The heading appropriate to this clearly defined function is also heading 9010, HTSUS. Even when raw film is not involved, the process whereby a digital image is printed onto photographic paper is equivalent to that which is performed in a photographic laboratory. Accordingly, equal numbers of LPs and SPs that are imported without FPs are properly classified in heading 9010.50.6000, HTSUS, which provides for “Apparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof: Other apparatus and equipment for photographic (including cinematographic) laboratories; negatoscopes: Other.”

In closing, we note that Fuji has indicated that the FPs, SPs, and LPs may be imported with other articles that perform related functions. These other articles are not within the scope of the internal advice request, and our decision in this matter does not address their classification.


HOLDING:

    Under the authority of GRI 1 and Note 3 to Chapter 90, equal numbers of film processors, laser printers, and scanners are functional units provided for in heading 9010, HTSUS. They are specifically provided for in subheading 9010.10.0000, HTSUS, which provides for: “Apparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof: Apparatus and equipment for automatically developing photographic (including cinematographic) film or paper in rolls or for automatically exposing developed film to rolls of photographic paper.” The 2008 column one, general rate of duty is 2.4 percent ad valorem.

Additionally, under the same authority, equal numbers of laser printers and scanners which remain in the absence of FPs are also functional units provided for in heading 9010, HTSUS. They are specifically provided for in subheading 9010.50.6000, HTSUS, which provides for: “Apparatus and equipment for photographic (including cinematographic) laboratories, not specified or included elsewhere in this chapter; negatoscopes; projection screens; parts and accessories thereof: Other apparatus and equipment for photographic (including cinematographic) laboratories; negatoscopes: Other.” The 2008 column one, general rate of duty is free.

    Duty rates are provided for your convenience only 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/tata/hts.

You are to mail this decision to the internal advice requester no later than 60 days from the date of the decision. At that time, Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.


Sincerely,


Myles B. Harmon, Director
Commercial Trade and Facilitation Division