Customs Law Advisory - Court Decision Provides Guidance to Importers for Classification of Goods "Not Specified or Included Elsewhere" and of "Parts"

When declaring the correct classification number for imports into the United States, two concepts used throughout the Harmonized Tariff Schedule of the United States (“HTSUS”) often cause particular difficulty for importers.  These are: (1) merchandise that is “not specified or included elsewhere” in any other HTSUS provision, and (2) merchandise that qualifies as “part” of another product.

A decision last month from the U.S. Court of International Trade (“CIT”), in Fuji America Corp. v. United States, Slip Op. 06-116 (July 26, 2006) presents a step-by-step analysis of both these concepts and will make a useful tool in any importer’s compliance file.  Even if a company imports different types of merchandise than those at issue in Fuji America, these two concepts often arise for many different products.  Declaring the correct tariff classification number is a fundamental part of an importer’s compliance obligations under U.S. law, and is critical in order to avoid shipment delays or potential penalties from U.S. Customs and Border Protection (“CBP”).

Not Specified or Included Elsewhere
The first machine at issue in Fuji America was a “chip placer” used to place components such as resistors, capacitors and circuits onto blank printed circuit boards.  CBP classified the chip placer under HTSUS heading 8479 which covers machines “not specified or included elsewhere in this chapter.”  This classification carried a duty of 2.5%, ad valorem.  Fuji America argued that the chip placers should be classified under HTS heading 8428 as “Other lifting, handling, loading or unloading machinery”, because the primary function of the chip placers is to lift and handle electronic components as part of placing them on the blank printed circuit board.  This classification would be duty free.

In order to determine whether the good was specified or included in some provision of the HTSUS, the CIT explained that it would examine the “primary function” of the chip placer and would consider the function within the entire process of making printed circuit assemblies.  The CIT noted that the chip placer does not simply move the components from place to place.  Rather, the chip placer grasps the blank printed circuit board, locates the proper placement for components, calculates minor revisions to placement, selects the proper placement tool and moves the component into place on the board.

The CIT found that the “chip placers’ primary function is not the passive lifting and handling of materials but, rather, an active and integral step” in making printed circuit assemblies.  Since machines with that function are not specifically listed in any tariff heading, the CIT found that CBP’s classification was correct.

Parts
The second machine at issue in Fuji America was a “chip feeder,” used to deliver the electronic components to the chip placers.  At stake here also was 2.5% ad valorem duty on the imported merchandise.  Fuji America argued that chip feeders should be classified under tariff heading 8431, which covers “Parts suitable for use solely or principally with the machinery of heading 8425 to 8430 . . .” (these headings cover pulley tackle and hoists, other lifting machinery, bulldozers, graders and other excavating machinery).  Customs argued that classification of the feeders under heading 8431 was inappropriate because “the machine of which these feeders are parts of is not a Heading 8428 machine.”  Since the CIT had agreed with Customs that the chip placers were not classified in heading 8428, it also agreed that chip feeders could not be considered parts of machines in heading 8428.

The CIT turned to the HTSUS section notes for guidance in this area.  The notes explain that where parts of machines are specifically named, they should be classified in that subheading.  On the other hand, the notes also provide that, if the parts are “suitable for use solely or principally with a particular kind of machine,” those parts should be classified with that kind of machine.

The CIT cited to prior court decisions which held that “an imported item dedicated solely for use with another article is a ‘part’ of that article within the meaning of the HTSUS.”  The CIT found that the chip feeders were dedicated solely for use with chip placers and, therefore, should be classified with chip placers in tariff heading 8479.  Moreover, since subheading 8479.90 specifically covers certain machines and “parts thereof,” that subheading applied.  Finally, since there was no provision within 8479.90 for chip feeders, they were properly classified under subheading 8479.90.9595 as “Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof . . . Parts . . . Other . . . .”

The CIT’s decision in Fuji America Corp. v. United States is available on the Court’s website.

The decision provides a highly useful review for any company official responsible for  U.S. import compliance, especially for ensuring that the correct classification number is declared to CBP for imported merchandise.

U.S. law requires importers to exercise reasonable care to confirm that all the information declared to CBP is complete and accurate.  This responsibility rests solely with the importer, not the broker or supplier, although they may assist and advise the importer in reaching a decision.  One of the most fundamental pieces of information to be declared is the classification number, under the HTSUS.  The Fuji America decision provides an important tool for working through two of the classification issues that often create confusion for importers across a wide array of products.

If you have any questions regarding U.S. import procedures, please contact Greg McCue at (202) 429-6421.