August, 2017

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The Tariff Classification of “Combo” Articles

Mark K. Neville, Jr.

First off, let me apologize to my non-US readers for this use of American slang in the title. The shortened term “combo” (derived from “combination”) is well known here but others may not recognize its reference to an article or a person that combines or embodies two or more separate identities or to two or more separate but related actions. As an example of the term when applied to a person, a “combo” guard in basketball is a player who can play either a shooting guard or a point guard role but who doesn’t necessarily fit the pure profile of either. The term also has a well-know provenance in boxing, with a sequence of different punches, such as 1-1-2, which is two left jabs followed by a right cross, referred to as a “combination.”

In customs law we do not use the term but we must deal with the concept when faced with classifying a “combo” article. For instance, how should one classify an article that is a washer and dryer. What about an article that is a printer/fax machine/scanner? Or, as a general matter, how about any article that combines two separate machines into one? The Harmonized Tariff System (HTS) for tariff classification law anticipates these tasks.

First off, the combo item may be separately identified in the HTS. For example, we have item no.8450.11.0080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for household- or laundry-type front loading washing machines, including machines which both wash and dry: machines, each of a dry linen capacity not exceeding 10 kg: fully automatic machines. As another example, a combination generator and turbine is specifically provided for as an electric generating set in heading 8502. The tariff classification of separately presented generator and turbine elements led to the issuance of ruling no. H240128 (7/31/14) which had been prompted by a request from the port of Houston for Internal Advice from Headquarters. There, the importer had sought separate classification of the major elements, which were described thusly

an assembled generator, mounted to the inside of the nacelle, is imported. The nacelle also features a motor controller system, air regulator and other support components. Motors for rotor shaft/yaw drive control may also be incorporated. The nacelle is designed to be installed atop a utility scale wind tower. A nacelle cover is installed after final assembly of the wind generator. In addition, unassembled components of the “prime mover” – the wind turbine – are imported. These include the large turbine blades, the pitch controller motors and systems, the low speed shaft, the hub, the cone which covers the hub, and related hardware.

After importation the various elements would be assembled—the nacelle will be assembled with the low-speed shaft, the hub, pitch controller motors and other components, and will be placed atop the utility scale wind tower. Thereafter, the remaining components of the turbine will be assembled onto the hub, the “prime mover” will be joined to the generator, and electrical generation can begin.

The HTS carries a provision for an “electric generating set.” This is at heading 8502, and the use of the term “set” suggests that we are dealing with a combo article. In fact, the Explanatory Note (EN)1 for this heading immediately bears this out.

(I) ELECTRIC GENERATING SETS The expression ‘generating sets’ applies to the combination of an electric generator and any prime mover other than an electric motor (e.g., hydraulic turbines, steam turbines, wind engines, reciprocating steam engines, internal combustion engines). Generating sets consisting of the generator and its prime mover which are mounted (or designed to be mounted) together as one unit or on a common base (see the General Explanatory Note to Section XVI), are classified here provided they are presented together (even if packed separately for convenience of transport).

We see that we are dealing with a generator and a “prime mover.” Headquarters explored (at p. 5) the term “prime mover,” citing, inter alia, to a trade treatise definition, “The system that drives the generator rotor is often referred to as the prime mover. The prime mover system includes the turbine (or other engine) driving the shaft, the speed control system, and the energy supply system for the turbine.” The ruling went on to equate a “prime mover” with a “wind engine” and then observed that

Now that the components which comprise the prime mover of a wind turbine have been specifically identified, we turn to consideration of the instant product. The imported product contains a generator and all of the component parts of a wind engine, including the entire blade assembly. The product consists of a generator and a prime mover, presented together, designed to be mounted together as one unit or on a common base, namely a utility scale wind tower. However, the product is presented in an unassembled state.

For those readers who are adept at tariff classification the reference to the “unassembled state” has great significance, as the General Rule of Interpretation (GRI) 2(a) prescribes that “[a]ny reference in a heading to an article shall … also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.” Accordingly, CBP noted that

In its condition as imported, the instant nacelle contains all of the components necessary to capture wind energy and convert it into useful electrical energy… As such, the instant product is properly classified as an unassembled electric generating set in heading 8502, HTSUS, pursuant to GRI 2(a). ..Specifically, the instant product is classified under subheading 8502.31.00, HTSUS, which provides for “Electric generating sets and rotary converters: Other generating sets: Wind-powered”.

A third example of a specifically provided for combination article is the class of refrigerator/freezers that are typically found in the kitchen of many a homeowner. They are to be classified under subheading 8418.10.

So far, so good. We have established that certain combination articles have been assigned wit their own tariff homes. But what if we have an article that does not fit neatly into such a provision? How should one proceed?

In the old, pre-HTSUS days we would have relied on the “more than” doctrine. As was explained in ruling no. 964384 (12/4/00)

The "more than" doctrine was a principle of classification under the Tariff Schedules of the United States ("TSUS"), the precursor to the HTSUS. Reference to the "more than doctrine" is inappropriate for classification of merchandise under the Harmonized Tariff Schedule…

Ruling no. 080969(11/21/88), which involved classification under the TSUS explained, in pertinent part, that the "more than" doctrine, provided that:

[w]here an article is in character or function something other than as described by a specific statutory provision-either more limited or more diversified-and the difference is significant, it cannot find classification within such provision. It is said to be more than the article described in the statute. Robert Bosch v. United States, 43 Cust. Ct. 96, C.D. 3881 (1969).

CBP went on to explain that GRI 2 (b) supplanted the doctrine. We should note that GRI refers to mixtures and combinations of materials or substances. As CBP has observed quite succinctly (ruling no. 962973, 7/27/01), however, the “more than” doctrine is no more:

It has been Customs position that the “more than” doctrine does not apply to cases arising under the HTSUS. This position has been affirmed in JVC Company of America v. United States, 234 F.3d 1348, 1354 (Fed.Cir. 2000), in which the court stated that: “this statutorily-prescribed, comprehensive, and systematic method of classification set forth in the GRIs supplants the judicially-created ‘more than’ doctrine and precludes its applicability to cases arising under the HTSUS.”2

EN XIII to GRI 2 (b) posits that for these combination articles, tariff classification must fall under GRI 3. This brings us first to GRI 3 (a), which holds, in pertinent part, that when two or more headings refer to part only of the materials of substances in a composite good, those headings are to be regarded as equally specific in relation to those goods.3 In that case, classification is sought under GRI 3 (b), which calls for classification as if they consisted of the material or component which gives them their essential character.

The GRI 3 rules beg the question, what is a composite good? The HTS does not define the term other than by reference to an article being made of different components or materials.4

Where no one element can be seen to be decisive in an “essential character” review, classification moves on to GRI 3 (c), which essentially looks to the last appearing HTS which applies to any of the individual components. An example of this process in action is provided by ruling no. N254874 (7/18/14), where a “Wallet Ninja” was being classified.5 This was described in the following terms

This multifunctional tool is made of steel and measures approximately 3 3/8” x 2 1/8”. Its flat design enables it to fit into a wallet. The tool incorporates six nonadjustable open-end hex-head wrenches, four screwdrivers, a bottle opener, can opener, letter opener, box cutter, fruit peeler and a ruler that is marked in inches and centimeters.

CBP noted none of the individual elements had priority over any of the others, concluding that

Inasmuch as no essential character can be determined for the instant item, GRI 3(b) does not apply. GRI 3(c) states that when the essential character of a composite good cannot be determined, classification is based on the heading that occurs last in numerical order among those which equally merit consideration. In this case, the ruler falls last within heading 9017, HTSUS, in accordance with GRI 3(c).

Composite Machine

Quite apart from the general reference to composite goods, there is a specific treatment that applies to combo machines. The term “composite machine” is defined in Section XVI Note 3,

Unless the context requires otherwise, composite machines [consist] 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.

In a slight variation from the essential character test of GRI 3 (b), this Section Note requires that tariff classification should follow as if the machine consisted only of that component or as being that machine which performs the “principal function.”

There have been a plethora of combo or “multi-function” machines that have been developed over the course of the past twenty or twenty-five years and their tariff classification has been problematic. In one ruling request, CBP was asked to classify the following 6-in-1 article

6-in-1 multifunctional machine which performs printing/ copying/facsimile/scanning/PC fax and telephonic functions. This 6-in 1 multifunctional device operates on thermal transfer technology, and is designed to be used as an output unit within an automatic data processing (ADP) environment.6

CBP reasoned that the article was a composite good and that a GRI 3 (b) analysis showed that the essential character appeared to be as a network printer. Classification in 8471.60.5500 followed. It was curious that a Section XVI analysis was not applied but we would observe that the result would have been unchanged.

Earlier a color printer was classified by Headquarters in item no. 8443.59.5000 instead of in subheading 8471.60 after an application of the Chapter 84 Notes. Ruling no. 957981 (7/9/97). And we later saw a number of rulings that classified multi-function machines such as printer/copier/faxes in 8472.90.8000, revoking earlier rulings that had placed the articles in 8471.60.52 and other tariff provisions. See, e.g., ruling no. 965681 (8/30/02).

To show the constantly evolving nature of the HTS, as well as to focus on these combination articles, we can cite to ruling no. H036397 (12/20/10) which dealt with an article which

features printing, copying, scanning and emailing functions. There is also an option to include a one or two line fax machine, although there is no indication that the option will apply to the instant product at the time of importation. The product is also connectable to a Local Area Network (LAN) to enable multiple computer workstations to take advantage of the product’s functions.

The ruling noted that heading 8443 includes “other printers, copying machines and facsimile machines, whether or not combined…” The ruling also drew attention to the EN

EN 84.43(II)(D), which describes merchandise of heading 8443, HTSUS, that are combinations of printers, copiers and facsimile machines, states the following:

Machines which perform two or more of the functions of printing, copying or facsimile transmission are generally referred to as multi-functional machines.  These machines are capable of connecting to an automatic data processing machine or to a network.

We might conclude that if there is enough of a market for a combination article the HTS will itself be changed over time so as to specifically provide for the “combo” article and this, in turn, will lead to a GRI 1 tariff classification, as here.

To return to the main thread of our analysis, we can look over CBP’s shoulder as it wrestled with a Section XVI Note review of a dual function flashlight/lantern in ruling no. W968278 (3/30/07) (revoking ruling no. 967976, 4/20/06). Seeing the two functions as a “tossup” CBP moved on to GRI 3 (c) as the basis of classifciation

…[T]he CompanionTM Lantern’s principal function cannot be identified only by reference to packaging and advertising. After applying the Carborundum factors,7 we find that the principal function cannot be identified. When it is not possible to determine the principal function of an item, classification is made in accordance with GRI 3 (c). The Companion™ Lantern is prima facie classifiable under both subheading 8513.10.20, HTSUS, and subheading 8513.10.40, HTSUS. By application of GRI 3 (c), therefore, the article is classified under subheading 8513.10.40, HTSUS.

While composite machines represent a single machine that combines distinct elements that perform distinct functions, there is another example of a combo, in fact the reverse, two or machines combined to perform a single function. These are termed “functional units.”

Functional Units

The HTS specifically provides for functional units in Note 4 to Section XVI, HTSUS, which 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.

Further insight is provided by the ENs, the relevant excerpt (General Explanatory Note VII to Section XVI) stating

[f]or purposes of this Note, the expression "intended to contribute 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 [emphasis added].

We find an example of CBP dealing with these classification issues in ruling no. 967565 (6/08/06) which concerned the tariff classification of production equipment which constituted an assembly line used for finishing operations on lenses for rear projection televisions. The importer manufactures lenticular and fresnel lenses for rear projection television systems and imported the machinery to produce them.

Importantly, the imported equipment functioned as a single assembly line, and was divided into four sections: a substrate supply unit; coating fabricator; trimmer; and a stacker. All four sections were imported together in a single shipment.

CBP regarded the assembly line as being dedicated to a single overall function: the working of plastic, here acrylic sheets.  In that connection, some of the various machines were relegated to secondary roles (trimming, coating and handling), all in furtherance of the primary function of working plastic, presumably negating the importer's arguments on their roles.  The importer also suggested an alternative argument that would have effectively put forth two separate aspects of the finishing function--cutting and trimming and material handling. That might have resulted in something like co-equal functions for the machines involved but that, too, was rejected.  In effect, CBP disagreed with the importer's effort to parse the machines' functions into their different elements, concluding that were was one function served by all of the linked machines—working plastic—and that function was identified in the HTS in heading 8477.

In this connection, note that another excerpt from the relevant EN states

This Note applies when a machine (including a combination of machines) consists of separate components which are intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or, more frequently, Chapter 85.

In 2015 CBP was concerned with the tariff classification of a pneumatic cylinder actuator and electro-pneumatic positioner. Ruling no. H258774 (11/10/15). An actuator was described as a type of motor responsible for moving or controlling a mechanism or system. Pneumatic, in this context, means the motor is powered by compressed or pressurized air. “Cylinder” in this context, specifically a pneumatic cylinder, is where the power of the compressed gas produces a force in a reciprocating linear motion.

The electro-pneumatic positioner attaches to the pneumatic cylinder actuator. The positioner converts a DC input signal into a pneumatic output for positioning and control of the valves, which are a separate component and are not included in this Protest, nor are they imported with the subject actuator and positioner. The articles have various uses but generally speaking they are components of control valve systems used in the oil and gas industry, nuclear or fossil power plants.

CBP concluded that

the “clearly defined function” of the two machines is that the electro-pneumatic positioner provides power to the pneumatic cylinder actuator which, in turn, operates to open and close the valves they are attached to after entry. The role of each component is clear, and neither component can fulfill its function without the other. Together, they are a “functional unit.”

A final example of a functional unit is the importation of a “cutting plotter” and a printer classified under subheading 8443.99.50. The clearly defined function of the cutting plotter/printer functional unit was found be the printing of graphics for designs, labels, decals, and similar graphics. Ruling no. H271910 (4/12/17).

Conclusion

At the risk of making a generalization, one of the driving forces in making combination articles has to be the delivery of greater levels of convenience to consumers. This is certainly what we saw in the rulings on composite machines. Functional unit issues, on the other hand, tend to arise more in a manufacturing or industrial production context. But regardless whether we are dealing with a consumer product or an assembly line, the above principles will apply.

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1. The ruling contains the following text which is usually incorporated into any tariff classification ruling in order to properly characterize the role of the ENs: The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the EN provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

2. See also ruling no. 962643 (7/9/01).

3. For completeness’ sake we note that GRI 3 (b) also governs the tariff classification of retail sets, which is outside the bounds of this discussion.

4. See, e.g., ruling nos. N246377 (9/25/13) and N243402 (7/11/13).

5. For another GRI 3 (c) tariff classification, see ruling no. 279846 (10/27/16) (knife sharpener with elements made of different materials)

6. Ruling no. D89153 (3/22/99).

7. This is a reference to the various factors used to analyze the principal use of the class or kind of merchandise of which the imported article is an exemplar. The factors are derived from the rubric set forth in United States v. Carborundum Co., 63 CCPA 98, 102, 536 F.2d 373, 377 (1976), cert. denied, 429 U.S. 979 (1976).


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