MOOSBRUGGER, KARL Good afternoon, everyone.
MOOSBRUGGER, KARL My name is Carl Moosbrugger.
I'm NIS 220.
MOOSBRUGGER, KARL And I just wanted to thank everyone
for taking the time out of your busy schedules
to attend this presentation today.
Our goal is that you will come away with a better understanding.
MOOSBRUGGER, KARL Before we get started,
we have some general housekeeping slides to go over.
Our intent for this webinar.
As I said before, is to discuss.
MOOSBRUGGER, KARL Some terminology really quick,
there are many more types of cryptocurrency other than Bitcoin,
and but most cryptocurrencies are called.
MOOSBRUGGER, KARL Coins, if they're not Bitcoin, they're called alt coins.
MOOSBRUGGER, KARL We'll go over 80P in greater detail
later on the presentation or throughout the presentation,
but the legal provisions for ADP are found in Chapter 84, Note 6.
MOOSBRUGGER, KARL But the presentation when we say ADP,
we are referring to Automatic Data Processing machines.
The term computer is just too vague and it could refer to a machine
that computes.
MOOSBRUGGER, KARL But it may not satisfy node 6.
MOOSBRUGGER, KARL An application specific integrated circuit
is a semiconductor component that is soldered onto a printed circuit board.
The ASIC, as they're called, is designed to perform a specific function,
whereas the FPGA or field programmable gate array gets
its specific functionality through programming.
MOOSBRUGGER, KARL We'll discuss ASICS and FPGA's
and greeted detail throughout the presentation.
MOOSBRUGGER, KARL A GPU is a graphics processing
printed circuit board assembly that can be used to perform mining functions.
These are relatively common boards.
MOOSBRUGGER, KARL That are frequently used in gaining personal computers.
If you play video games at home, you probably have a GPU
in your personal computer.
MOOSBRUGGER, KARL The hash rate is a special is a specification
of the number of guests that are performed per second.
MOOSBRUGGER, KARL So.
MOOSBRUGGER, KARL 1,000,000 hashes is how good that machine works.
We discussed mining already, but in general crypto mining is how new units
of cryptocurrency.
MOOSBRUGGER, KARL Which we set are called coins are created.
MOOSBRUGGER, KARL Although a personal computer is used to configure
and manage the mining pools.
MOOSBRUGGER, KARL For a particular cryptocurrency,
the personal computers themselves are not typically used
to mine cryptocurrency any longer, simply because they can't generate
enough hash calculations to be profitable.
MOOSBRUGGER, KARL A personal computer simply doesn't have
the processing power to keep up with mining technologies.
MOOSBRUGGER, KARL For example, under the current level of mining,
difficulty for a Bitcoin.
MOOSBRUGGER, KARL Even the fastest personal computer
would likely take millions of years to mine one single Bitcoin.
MOOSBRUGGER, KARL Another type of mining hardware is the GPU.
These are graphics boards, as we said earlier.
MOOSBRUGGER, KARL They've been repurposed to do crypto mining,
so while they're made and they're generally dedicated
to be graphics boards.
MOOSBRUGGER, KARL Specialized software was written
to harness their processing power to do mining functions.
MOOSBRUGGER, KARL GPU mining is much faster than the personal computer,
and some cryptocurrencies are actually designed to work better from a GPU
than other mining technologies like Ethereum, for example.
MOOSBRUGGER, KARL And because there are many preexisting graphics boards
already in the market.
MOOSBRUGGER, KARL Mining with GPU's became very popular
and still is to some extent.
MOOSBRUGGER, KARL GPU's are pretty good at calculating the hash algorithms
and can be combined with multiple GPUs into a single machine
that is commonly referred to as a rig.
MOOSBRUGGER, KARL And because there are hundreds of different types
of currencies in existence, some are better suited by GPU.
MOOSBRUGGER, KARL And the market has evolved in such a way
that there are now GPU boards that have been specifically designed for use
with mining cryptocurrencies.
MOOSBRUGGER, KARL We would want to keep our eyes open.
MOOSBRUGGER, KARL Specifically for these, as they could be considered
having a dedicated use which would impact the turf classification.
MOOSBRUGGER, KARL Field programmable gate arrays.
MOOSBRUGGER, KARL Fpgas are microprocessors that can be programmed
for a specific purpose.
They can be used in manufacturing processes like a controller,
or they can be programmed to control lights or operate sensors and pumps.
All sorts of electrical machines.
MOOSBRUGGER, KARL In the case of cryptocurrency mining,
they are configured to perform hash calculations,
and they could do it pretty well.
MOOSBRUGGER, KARL But Fpgas have only a slight performance advantage
over using a GPU.
MOOSBRUGGER, KARL And they're much harder to come by,
so the FPGA mining at the moment is not as popular
as some of the other technologies.
MOOSBRUGGER, KARL With the introduction of the ASIC miners,
some mining operators.
MOOSBRUGGER, KARL Compelled to make a move from FPGA's to basics.
MOOSBRUGGER, KARL Nevertheless, FPGA mining is worth learning about
and maybe become popular again.
You were generation FPGA's are much faster and run leaner than those
in the past.
So we wanna keep our eyes out for their use.
What's important to remember about Fpgas is that
they are printed circuit board assemblies
that are programmed to the type of currency that are mined.
MOOSBRUGGER, KARL ASIC Mining is currently the fastest method
of farming cryptocurrency.
MOOSBRUGGER, KARL The mining rigs can be set up as a single unit.
MOOSBRUGGER, KARL Or, as I'm sure you've heard,
they can be grouped together to form mining farms.
MOOSBRUGGER, KARL Which I have hundreds or even thousands
of ASIC miners working together.
MOOSBRUGGER, KARL The typical ASIC miner has the single controller board
with an aluminum enclosure and one or more hash boards that I'll show you
on the next slide.
MOOSBRUGGER, KARL This unit pictured here requires a separate power supply
that is attached to the individual hash boards.
MOOSBRUGGER, KARL The ASIC miners have the largest known hash rates
for the ones being imported today are capable of processing in the ballpark
of 110 terahash per second.
MOOSBRUGGER, KARL This slide shows a single hash board.
You can see that it's printed circuit board assembly
with many ASICS mounted to it.
The three hash boards.
MOOSBRUGGER, KARL Are connected to an onboard controller by a ribbon cable.
During the Operation, A6 consume a lot of electricity and produce a lot
of heat, and that's why there are heat sinks attached to top of each chip
and the mining enclosure typically has dual fans to increase the air flow.
MOOSBRUGGER, KARL So back in 2018.
MOOSBRUGGER, KARL Did the first webinar
on my name machines like I said before, there were no classification rulings
for these devices yet.
MOOSBRUGGER, KARL Since then, CBP has issued a number
of joints where consideration was given to the mining machines
being classifiable or possibly being classifiable under heading 8471
as an 80P machine.
MOOSBRUGGER, KARL CBP is consistently disagreed with this position,
and it's what we're going to be focusing on for the rest of my portion
of the webinar.
MOOSBRUGGER, KARL Before we begin, I'd like to remind everyone
that we don't take a piece of information for one ruling or a webinar.
MOOSBRUGGER, KARL And apply it across the board
to multiple unrelated machines that we think might be similar.
You have to look at all the facts.
You can't just look at the name or the type of technology use.
MOOSBRUGGER, KARL When CBP issues the ruling for a particular product,
it reviews the facts presented for that machine
and the classification is determined based on those individual facts.
MOOSBRUGGER, KARL Just a real quick look at the legal notes for Session 16.
Note 2 instructions on how to classify parts of machines that are classifiable
in chapters 84 and 85.
MOOSBRUGGER, KARL It also lays the groundwork for
how we classify those parts.
MOOSBRUGGER, KARL Either in their own specific tariff number or as part
of the machine that they are intended to be used with,
node three is particularly relevant because we are instructed
to identify a machines principal function and to classify according
to that function.
MOOSBRUGGER, KARL And then a four to section 16 talks about
when a combination of machines that are intended to contribute together
to a clearly defined function, you're instructed to classify according
to that function.
MOOSBRUGGER, KARL Moving on to the chapter notes, up until 2022,
Chapter 84, Note 6 used to be Note 5.
So if you go on into across or online and you are researching rulings
that refer to a different note, remember that the tariff is a living document.
MOOSBRUGGER, KARL That changes throughout the years.
All, be it excruciatingly slow.
Sometimes it does change.
MOOSBRUGGER, KARL OK, so note 6 lays out the requirements
for classification of merchandise under 8471.
MOOSBRUGGER, KARL Node 6A is the ADP machine itself.
MOOSBRUGGER, KARL 6B refers to 80P systems
which were just gonna touch a little bit on note 6C talks about units of ADP.
MOOSBRUGGER, KARL 6D are the exclusions to ADP and then note 6E.
MOOSBRUGGER, KARL Are the specific function exclusions.
MOOSBRUGGER, KARL As I said, no 6A covers the ADP machine itself.
MOOSBRUGGER, KARL It list the four core requirements
for classifying the central processing unit like a motherboard or a laptop
or a personal computer or other type of ADP machine under heading 8471.
MOOSBRUGGER, KARL The requirements to classify an 80P machine
and heading 8471 requires that the machine must be able
to store the program for its execution.
It has to be freely programmable, it must perform computation specified
by the user and it must run the processing program
without human intervention.
MOOSBRUGGER, KARL I mentioned laptops, desktops, tablets
and similar devices, but technology moves fast much faster
than turf is able to keep up with.
MOOSBRUGGER, KARL So we're constantly being challenged with the concepts
of what is or isn't an 80P machine,
which is the reason for this presentation.
MOOSBRUGGER, KARL Note 6B talks about ADP systems.
MOOSBRUGGER, KARL Like I said, we're not really gonna discuss ADP systems
much today.
MOOSBRUGGER, KARL But the explanatory notes do spell out
what comprises a system which is the processor.
MOOSBRUGGER, KARL An input unit in an output unit.
MOOSBRUGGER, KARL Chapter 8 four.
Note 6C.
MOOSBRUGGER, KARL Starts out with subject to the exclusions of note D&E.
Note 6 E governs units of ADP, so to be considered a unit of ADP,
the machine must be principally used, and an ADP system,
it must connect to the CPU either directly or through another unit,
and it must give or receive data that is used by the system.
MOOSBRUGGER, KARL Note 5C formalizes the term units,
so whenever you're discussing Automatic Data Processing
when the term unit is used, it means ADP unit.
MOOSBRUGGER, KARL ADT units are not the same as ADP machines.
MOOSBRUGGER, KARL Rather, they're the devices that connect to
and work with the ADP machines.
For example, a computer keyboard isn't ADP input unit.
MOOSBRUGGER, KARL A USB hub is an input unit.
MOOSBRUGGER, KARL But if you exceptions, note 6C requires
that all units must fulfill the three bullets listed here.
MOOSBRUGGER, KARL An important point to make is that the ability
to be used in an 80P system does not necessarily mean
that the item is classifiable in the ADP unit provisions.
So let's talk about exclusions.
It does say right here subjects to note.
MOOSBRUGGER, KARL I'm sorry, subject to paragraph DNE.
MOOSBRUGGER, KARL Note 6D in general says telecommunications equipment,
cameras, microphones, printers, and other machines.
There's a list of them that say they're not allowed to be classified ad for 71.
So I'm not going to have that slide, but chapter 84 note 6E.
MOOSBRUGGER, KARL Says this machines incorporating or working
in conjunction with an Automatic Data Processing machine
and performing a specific function other than data processing
or to be classified and their headings and the headings appropriate
to their respective functions.
Or failing that, in residual headings.
MOOSBRUGGER, KARL This is especially relevant to the classification
of mining hardware because in some fashion mining machine.
MOOSBRUGGER, KARL Work in conjunction with an AP machine,
and they may even incorporate an AP machine.
MOOSBRUGGER, KARL But they have a dedicated function of mining
and it's not data processing and they would be subject to note 60.
MOOSBRUGGER, KARL For example.
MOOSBRUGGER, KARL The mini USB C is what we call a single board computer.
MOOSBRUGGER, KARL And all in one PC should be pretty familiar to everyone.
MOOSBRUGGER, KARL Each of these machines have the capability
to perform some type of mining function, but the main or the principal function
of the 80 ADP machine is general purpose computing through the use
of a variety of programs.
So these computers would not be dedicated to performing mining hashes.
MOOSBRUGGER, KARL And of course, another consideration is
how the products are marketed.
MOOSBRUGGER, KARL Are they solely dedicated for use in mining?
Is there an economic practicality of the important being used
for a particular purpose?
MOOSBRUGGER, KARL These are all the characteristics
that must be considered along with the physical characteristics
of the merchandise, the expectations of the ultimate purchaser,
environment of sale, the use of a similar machine
that defines the class of merchandise, economic practicality
or recognition in the trade of its use.
MOOSBRUGGER, KARL Here we have the personal computer on the left,
which is an ADP machine.
It's freely programmable.
There are no hardware or software limitations imposed on the user.
It has standard hardware and an operating system that.
MOOSBRUGGER, KARL Like can be changed.
MOOSBRUGGER, KARL It satisfies note 6A and is commercially recognized
as a PC and function cost etcetera.
MOOSBRUGGER, KARL On the right, however, we have a motherboard
with 12 PCI E slots that can accommodate 12 GPU.
MOOSBRUGGER, KARL Worst picture?
MOOSBRUGGER, KARL USB riser boards for expanding the mining hardware
to a single motherboard.
The crypto mining motherboard especialized.
It's marketed that way.
It's priced that way and it's used as a money machine.
MOOSBRUGGER, KARL Where the motherboard merely acts
as the controller or the connection point running the mining software.
MOOSBRUGGER, KARL In this example, it doesn't matter
that the crypto minor could be used as an ADP machine section.
MOOSBRUGGER, KARL Note 3 requires us to classify machines according
to their principal function.
MOOSBRUGGER, KARL 80 machines don't operate on fixed programs.
MOOSBRUGGER, KARL And they are capable of storing multiple programs.
The interesting thing.
MOOSBRUGGER, KARL That I think about.
MOOSBRUGGER, KARL Here's the people forget the physical mismatch between.
MOOSBRUGGER, KARL A device like an epic mining machine,
as compared to a functional ADP machine, the ASIC miners,
they have no storage, they don't have the video output.
There isn't even a reason to attach a keyboard or a mouse.
MOOSBRUGGER, KARL There's nothing that is done locally
on the machine once it's configured to run, because the interface
with the mining machine is done by a web application over a network.
MOOSBRUGGER, KARL OK, so we've determined the cryptocurrency miners
in general are not considered, are not classified.
MOOSBRUGGER, KARL As the ADP machine under.
MOOSBRUGGER, KARL 8471 they're not for the programmable.
MOOSBRUGGER, KARL And they're not performing general purpose
computing functions etcetera.
MOOSBRUGGER, KARL But what about classification under 8471?
Has a unit of ADP.
MOOSBRUGGER, KARL Remember note 6C1 says that the unit
must be principally used in an ADP system.
MOOSBRUGGER, KARL Just we already discussed, they aren't and 662.
MOOSBRUGGER, KARL Says the unit must be connectable
to the ADP machine directly or through another unit.
MOOSBRUGGER, KARL A network connection does not satisfy
through another unit requirement.
MOOSBRUGGER, KARL Lastly, the mining is an autonomous function.
Once it's configured, it just runs and generates hashes until it solves one.
MOOSBRUGGER, KARL This falls to note 6E and is excluded by function.
MOOSBRUGGER, KARL As a result, cryptocurrency mining machines
cannot be considered units of ADP.
MOOSBRUGGER, KARL So to recap, note 6 to chapter 84.
MOOSBRUGGER, KARL We said 80P machines are free
to programmable devices.
Users can add programs that they're choosing
when cryptocurrency mining is one
of the many applications the ADP machine performs.
The mining function may not.
MOOSBRUGGER, KARL Precluded from.
MOOSBRUGGER, KARL Being satisfying note 6A, and it
may not be excluded by 6 E.
MOOSBRUGGER, KARL A machine that incorporates at 8:00 PM machine
but is performing a dedicated function of cryptocurrency mining
would be precluded from classification 8471.
Buy Note 6E and my machines can't be ADP units because they're not used
in an ADP system, and they're not connectable.
MOOSBRUGGER, KARL To a.
MOOSBRUGGER, KARL AP machine.
MOOSBRUGGER, KARL Before we end this up to Luke, I want to circle back
and talk about parts and section 16.
We classify parts in their own turf provision whenever applicable.
MOOSBRUGGER, KARL Here we have our commercially available
graphics processing unit.
MOOSBRUGGER, KARL Readily available online and after big electronic stores,
they're recognized and sold as graphics boards for personal computers.
The classification for the GPU is imported on its own is 8473 thirty 1180.
MOOSBRUGGER, KARL But GPU.
MOOSBRUGGER, KARL I'm sorry, once the GPU is installed
into a machine, whether it's an ADP machine or a mining machine,
it's classified with that machine.
That's classification 101.
MOOSBRUGGER, KARL But what about the GPU that's been modified,
especially for use as a crypto minor because it's dedicated as.
MOOSBRUGGER, KARL A cryptocurrency miner.
MOOSBRUGGER, KARL It would no longer be recognized as a part in 8473
if imported by itself, and it would be classified outside
of Chapter 84 altogether.
MOOSBRUGGER, KARL The same goes for the FPGA and the ASIC.
MOOSBRUGGER, KARL Remember that the function of the FPGA is determined
by its programming.
MOOSBRUGGER, KARL Mining programs must be written to the FPGA
to determine its use as a crypto miner.
MOOSBRUGGER, KARL Just like the code that's written for other functions
such As for industrial control or medical purposes, programs are written
to the FPGA to accomplish those functions.
MOOSBRUGGER, KARL Whereas ASICS used for mining are designed
and manufactured for that purpose, today's market, the internal circuitry
of an ASIC, has manufactured specifically for crypto mining,
is what likely dedicates its use for that function.
And it's not just programming.
MOOSBRUGGER, KARL But not all FPGA and ASICS are used
for cryptocurrency mining.
MOOSBRUGGER, KARL They are also used throughout the electronics
and machinery industry.
MOOSBRUGGER, KARL Just with crypto.
MOOSBRUGGER, KARL Just remember,
every classification must stand on its own,
so in ASIC board that is part of a laser cutting machine cannot be called
a mining board simply because it has a 6 mounted to.
MOOSBRUGGER, KARL And when ASICS and Fpgas are imported.
MOOSBRUGGER, KARL Unmounted or unattached to a board or assembly.
We're likely looking at heading 8542 because Chapter 85, node 12 says.
MOOSBRUGGER, KARL Headings 8541 and 8542 shall take precedence
over any other heading in the nomenclature.
MOOSBRUGGER, KARL Therefore, even if an ASIC that is specially designed
to be a cryptocurrency mining processor, when imported in an
in an integrated circuit form.
MOOSBRUGGER, KARL It must be classified under 8542.
MOOSBRUGGER, KARL Since the 2018 webinar
we have had some very detailed rulings issued
that could be a tremendous resource for the classification
of cryptocurrency mining machines.
MOOSBRUGGER, KARL I think that we can all recognize
that these machines are complex.
MOOSBRUGGER, KARL The classification approach that we have
to use is very convoluted.
MOOSBRUGGER, KARL Please do a good job
in addressing all the various angles and provide an explanation
as to why they are not AP machines where units, as you can see here,
CVP's position is that mine functions are not data processing functions.
MOOSBRUGGER, KARL That's the take away from the first half
of today's webinar.
MOOSBRUGGER, KARL Before we hand this off to Luke, I wanted
to bring up the pending classification issue before the Court
of International Trade.
The number is right here on the slide.
MOOSBRUGGER, KARL And the issue brought forth to the to the court.
MOOSBRUGGER, KARL Is.
MOOSBRUGGER, KARL The HP system classification
under 84 Seventy 149 versus.
MOOSBRUGGER, KARL That's all I have for my part today and I'm going
to hand it off to Luke.
I remember that specialized machines performing a function
that is not data processing or excluded from heading 8471.
It doesn't matter if it's hardware or software limitation.
If the machine cannot be freely programmed, it does not go in 8471.
MOOSBRUGGER, KARL If you have any questions, we can address them
at the conclusion of the webinar.
If time permits, or you can email me.
MOOSBRUGGER, KARL Here are our email addresses.
MOOSBRUGGER, KARL Which are also going to be at the end of this slide.
At this time, I'm gonna hand this off to.
MOOSBRUGGER, KARL Luke and I appreciate everyone again
for stopping in.
Thank.
LEPAGE, LUKE OK, everybody just give me one second while we.
LEPAGE, LUKE Get everything switched over.
LEPAGE, LUKE Alright, looks like I'm ready to go.
LEPAGE, LUKE Alright.
Hi everyone.
At first wanna thank Carl for his in depth and interesting presentation
that got us started as he said, my name's Lukla Paige and I'm the NIS
for Office 212.
LEPAGE, LUKE And I'll continue to discuss
where these minors should be classified in the rationale behind it,
but it's Carl did a really job discussing the particular technology.
LEPAGE, LUKE UM.
LEPAGE, LUKE That uh, the merchandise uses.
I'm gonna focus pretty much solely on how we got to the final classification.
LEPAGE, LUKE I got an email a bitterly
or from someone that saw the name
of the presentation and thought that maybe it was a webinar on investing.
Unfortunately, that's not the case.
I'm not quite that smart, so if you showed up thinking
we were gonna help you out with your retirement portfolio, sorry about that.
So.
LEPAGE, LUKE What if you have any questions like I said,
please put them into the chat box.
We'll try to monitor those and if we have have time at the end,
we'll get to any questions you may have.
LEPAGE, LUKE OK.
LEPAGE, LUKE A car went over a lot of our, you know, mission statements
and you know some of these house keeping slides at the beginning.
I did leave them in just in case since we're doing separate presentations.
If you open up mine or his, that way you'll have all of this information.
LEPAGE, LUKE Uh in the future?
LEPAGE, LUKE Same disclaimer that he went over.
LEPAGE, LUKE Again, he also went over this one.
LEPAGE, LUKE I know we already mentioned it,
but I can't really stress enough our preference to have ruling submitted
for issues that may come up.
This is especially true for any issues that may not have been addressed
before the tariff changed this year, as I'm sure that a lot of you know.
So it makes getting rulings on the books for some of these new
or altered headings all the more important.
Sometimes we may not realize there's an issue
with some changing classifications or an overlap
in some way before it's brought to our attention and a request.
LEPAGE, LUKE Also, there's always court cases in motion
that can affect the way that we interpret headings
and notes going forward.
LEPAGE, LUKE So kind of bear that in mind if you don't know which
if you if you don't know what's going on, just submit a ruling request
and we can we can help out with that.
And for those internal participants please also keep this in mind
when you're talking to your accounts.
LEPAGE, LUKE Uh, there are ways for for you folks to discuss,
discuss issues with us internally that may be more complex
or that you need a more concrete answer on.
Please keep those in mind going forward as well.
Bottom line, when in doubt, please reach out and submit a ruling to us.
LEPAGE, LUKE OK, this is a list of all the headings covered
by my Office 212.
As you can see we handle the end of Chapter 85
and the first part of Chapter 90.
Most of our work seems to be dedicated to headings 8543 and 8544,
but we do see a good amount within Chapter 90 as well.
LEPAGE, LUKE I I realized when I was going back through this this morning
that I forgot to include the new heading 8549 in here.
My office also handles that as well, so if you have any questions
or concerns about the electronic or electrical scrap,
the new heading I should be able to help out there as well.
Today we're gonna focus on heading 8543 that I highlighted here.
LEPAGE, LUKE OK.
They just said we're gonna be focusing on heading 8543 and most specifically
how the miners will get there.
LEPAGE, LUKE Coral uh.
It hopefully you don't get too caught up in a few things that we may
that we may repeat it just just bear with us on that because it's if
if we're repeating it, it's probably because we we think it's important
and there is some crossover between what we're gonna do.
I'll try to come at things at a little bit different way than he did.
So we won't bore you too much with hearing the same thing twice
but I'm really hoping we don't do that but OK.
LEPAGE, LUKE Here's the heading notation for 8543.
It's electrical machines having individual functions not specified
or included elsewhere in this chapter and parts thereof.
The way the heading reads, it's pretty easy to assume
and call this a basket provision within the terms of the HTS.
However, as you're gonna hopefully learn in the next bit of my presentation,
there's specific benchmarks that you must be able to hit before being able
to be included within the heading.
These criteria protect the heading from being a catchall for anything
and everything.
LEPAGE, LUKE That we can't plan is for.
LEPAGE, LUKE So here are the three distinct criteria in order for a good
or article to be included within heading 8543, it must meet these criteria.
LEPAGE, LUKE These are that it must be electrical.
It must have an individual function and it must not be provided for elsewhere
in the chapter.
If an article fails any of these criteria, then it can't be considered
for classification within the heading.
I'll discuss each of these in more detail in the next couple of slides.
LEPAGE, LUKE Though this electrical element seems pretty simple,
there's some things to keep in mind.
The explanatory notes dictate that the goods have to be primarily electrical.
LEPAGE, LUKE Many goods function mechanically or by some other means,
but are also powered electrically.
We must look at each of these and find whether the mechanical elements
are the critical feature or is it the electrical that's the most important.
If the electrical components are subsidiary to the mechanical ones,
then they can't be considered electrical goods.
LEPAGE, LUKE For classification and heading 8543.
LEPAGE, LUKE I put on here ruling H 259644.
This discusses the issue in a in a lot more detail and relates it
to this a little moving cat toy.
In this case they found that the cat toy was primarily mechanical
as the electrical qualities only supported the mechanical function.
In other words, this little cat toy was powered by a battery,
but the battery only served to allow the gears and small motors.
LEPAGE, LUKE Inside the toy to move around.
LEPAGE, LUKE Another way to think about this would be
to picture a mechanical machine like a drill or other power tools,
or like an industrial conveyor system.
These are obviously powered by electrical means they're plugged in,
or, you know, used some sort of generator to work,
but they're function is mechanical,
since the movements and functions are motor
and gear driven and not primarily electrical.
LEPAGE, LUKE OK, now we're going to get into the second criteria
for inclusion with heading 8543 and that it must have an individual function.
LEPAGE, LUKE In my view, this is where most of the goods get eliminated
from consideration and also the one that can be the most confusing.
LEPAGE, LUKE This next part might get a little bit confusing so.
LEPAGE, LUKE Please bear with me if you can.
A lot of it is is based on explanatory notes and and sometimes those don't.
LEPAGE, LUKE Get updated and or don't read as as clearly and and succinctly
as we may like.
So this is a lot of interpretation and and and helping through here.
So again hopefully I don't get too far into the weeds
and don't don't lose everybody out there.
LEPAGE, LUKE The explanatory notes to heading 8543 direct us to heading 8479
to reference the definition of individual function.
The in state that we change the word mechanical to electrical
in order to fit the definition.
LEPAGE, LUKE As you can see here, there are two separate parts
to the definition.
The first is states that the device has a function that works independently
from any other machine or appliance.
In other words, do you have to hook it up to another unit
in order to make it work?
If you don't, then we can consider it as having an individual function.
LEPAGE, LUKE However, this doesn't necessarily kick it completely out
because the next part talks about how if you do have to connect it
to something else.
LEPAGE, LUKE And is the function.
They can perform distinct from the machine that it's connected to,
and does it play an inseparable role in the units that it attaches to?
It's really critical to read that and.
LEPAGE, LUKE One this, this and right here hopefully that that helps out.
My cursor didn't work so never mind.
LEPAGE, LUKE Is the function that the good performs a separate function
from the unit that it attaches to.
LEPAGE, LUKE If so, does the host device need the unit in question
in order to work correctly?
LEPAGE, LUKE If the answer to the first question is yes and no
to the second, then the good can still be considered
to have an individual function.
LEPAGE, LUKE This part is going to be pretty critical going forward,
so hopefully it it makes some sense.
LEPAGE, LUKE Yeah, here a couple of examples from the explanatory notes
that hopefully will better illustrate what we're talking about.
LEPAGE, LUKE Again, these somebody, you'll notice some of these are are
maybe a little bit dated or or a little bit you know not relevant
to to current times, but the DNS aren't exactly updated.
LEPAGE, LUKE Quickly and sometimes they they the examples can get
a little convoluted but.
LEPAGE, LUKE The first one discusses a humidifier or dehumidifier
if this is a standalone unit, then it would meet the requirements
of the first part of the definition and that it's distinct
from any other machine.
LEPAGE, LUKE If it's designed to be mounted onto an ozone generator,
still performs a function independent from the generator,
and the generator would not need the dehumidifier to work.
Therefore it's considered to have an individual function.
LEPAGE, LUKE A better example may be a humidifier that is designed
to be installed on your home heating unit.
LEPAGE, LUKE Uh, the heating unit can function without the humidifier
and then be humidifier does not perform any part of the heating function.
LEPAGE, LUKE Then you would consider that as having an individual function.
LEPAGE, LUKE The second example in the slide is a chain cutter
that attaches to an industrial sewing machine that cuts the thread
as it passes through the machine.
LEPAGE, LUKE As it plays no role in the actual sewing function,
then we would consider it as having an individual function.
LEPAGE, LUKE The final example is the really dated one,
but still does have some relevance.
Discuss.
It discusses a carburetor for a vehicle engine.
If you know what a carburetor is, then you're either a little bit older
or into cars.
New cars don't necessarily have these, so it's probably time
for a better example to be put in here, but who knows when,
when and if that would ever happen.
LEPAGE, LUKE So the carburetor on an older engine performed
a distinct function from the engine.
The engine still required its presence in order to function.
Therefore we can't consider it as having an individual function.
The key point is that the engine can't function without it.
It's more of a critical part to the engine than something that is separate.
LEPAGE, LUKE Here are some more recent,
and probably a little bit more relevant, ruling examples
where individual function was discussed.
LEPAGE, LUKE In H 310654 we considered
a biometric time recording device
that was placed within a time keeping system in a business.
LEPAGE, LUKE The unit used facial recognition, fingerprint or card swipes,
or typed input to identify an individual as they came into the building
and recorded their time.
This info was then sent to the host application to collect all of the data.
LEPAGE, LUKE So it worked within the system.
LEPAGE, LUKE It's function of biometric collection of data.
LEPAGE, LUKE Was different and distinct from any other device.
LEPAGE, LUKE Also, the function is completed without the assistance
of another device.
Therefore it was found having individual function and is classified under 8543.
LEPAGE, LUKE Uh.
Similarly, in H 271470, we looked at a network security device that is placed
within the network of a commercial installation.
LEPAGE, LUKE You essentially put it within the network
and it monitors the traffic going in and out to try to spot any threats
or or other issues that may be coming in.
It's placed within an existing within an existing system, but the function
of providing network security is separate
from that of providing connectivity within the network.
Again, it was found to have an individual function per the terms
of the heading and the ENS.
LEPAGE, LUKE Finally, in H 302137, we looked at a musical ring device
that you wirelessly attach to a smart device.
LEPAGE, LUKE In allows the user to play program sounds when each color
of the ring is touched.
LEPAGE, LUKE So it had to be connected to the smart device.
It doesn't perform an integral function to your phone.
It's separate and distinct and would be considered
as having an individual functioning.
LEPAGE, LUKE Reading these rulings should help getting
a little better handle on the individual function part of the classification.
LEPAGE, LUKE I wanted to give a few examples of rulings
that did not meet the individual function criteria.
LEPAGE, LUKE In H 225039 we looked at a motorized caddy
that transported golf clubs.
LEPAGE, LUKE The requester stated
that the items had an individual function within heading 8479.
LEPAGE, LUKE Again, not 8543, but uses the same general definition.
LEPAGE, LUKE But CBP disagreed, so the ruling doesn't really dive deep
into the weeds of why it was not meeting the definition.
They do discuss how it is not incorporated within another unit,
and now it has a clearly defined function in and of itself.
LEPAGE, LUKE Likewise, in H 230513 and LED light was examined.
This light was not a replacement bulb, but a complete lamp that had
to be wired directly into the existing electrical system in order to be used.
LEPAGE, LUKE Because it had to be wired directly in
and was an integral portion of that, it was determined not
to have an individual function.
LEPAGE, LUKE I though neither of these rulings go into great detail
in explaining the exact Inns and outs of why the goods failed the test.
It's important that it does happen pretty regularly that goods do fail.
The individual function test.
LEPAGE, LUKE The one court case that routine that's routinely cited
with regards to individual function is Fuji America versus the US.
LEPAGE, LUKE Though the way I read it, it's a little tough to understand
and apply in all instances.
It does give some good insight regarding how a principal function can
still be an individual function as well as a good definition of integral
and inseparable regarding parts of items.
The case deals with chip feeders and placers that are used
to produce printed circuit assemblies.
LEPAGE, LUKE Though the case ends up classifying and heading 8479
and not 8543, still helpful when talking about individual function.
LEPAGE, LUKE Now on to the final requirement for inclusion
within heading 8543 is that the good cannot be provided for elsewhere.
The terms of the heading state anywhere else and the chapter.
But as you can see here, the explanatory notes expand this
to mean anywhere else in the tariff.
LEPAGE, LUKE This is important since there's a large amount
of crossover between chapters 84 and 85, as well as some
in further chapters like 90 and beyond.
LEPAGE, LUKE Wanted to note this passage from a court case
that contains some relevance to what we were talking about today
in Apex Inc versus the United States.
LEPAGE, LUKE Uh, it it said that classification is only appropriate
in a basket provision if there's no category that covers the merchandise.
More specifically, though I've stated throughout the first part
of the presentation that in order for a good to be classified
within the heading, there are certain benchmarks that it must hit.
LEPAGE, LUKE In that way, there can be some argument
that it isn't considered a basket provision in the traditional sense.
However, as it's heading where that we can put electrical goods.
LEPAGE, LUKE In that are not provided for elsewhere, the rules
of classifying within a basket are are appropriate.
LEPAGE, LUKE And you will see this quoted in past rulings concerning 8543.
LEPAGE, LUKE OK, so now we can move on
to exactly how the crypto miners get to be classified within heading 8543.
LEPAGE, LUKE Carl did a good job of of discussing a few of these.
These section notes here.
LEPAGE, LUKE But I wanted to bring them up again.
LEPAGE, LUKE Uh.
LEPAGE, LUKE Note 3 to section 16 of the HTS says
that a composite machine is either a machine that consists of two
or more machines, or one that contains 2 or more complementary functions.
You could classify these per the principal function of the unit.
LEPAGE, LUKE Carl touched on earlier that there
could be considered multiple functions that these items were form
from calculating to mining to processing.
It's important to figure out which of those are principal to the device.
This is important because as we examine the things that the miners do,
we need to decide if there's one function
that is the most important above all others.
LEPAGE, LUKE To go a little bit further and again, Carl,
they touch on this one Note 4 to section 16 says that
when a machine is comprised of a group of individual components used
for one clearly defined function, then the whole unit is classified pursuant
to that function.
We labeled this the functional unit note.
LEPAGE, LUKE So based on all this as well as the terms of the heading,
it's important to thoroughly examine the particular functions of the miners.
LEPAGE, LUKE Is the primary function to mine, or is it called something else?
The unit contains graphics and other processors.
Are these performing the function that is clearly defined?
LEPAGE, LUKE What is hash calculation and is that something we must look at?
LEPAGE, LUKE Again.
LEPAGE, LUKE Carl noted and discussed these three relatively recent rulings
on a couple of his slides.
I wanted to bring him up again in H 300063, H 310388 and H 309938.
These were all protests that were sent in headquarters or for further review,
and all three cases the Protestant entered the goods under heading 8471
and CBP subsequently liquidated the entries under 8543.
LEPAGE, LUKE This was protested and CVP's decision was upheld.
LEPAGE, LUKE The main take away from these rulings is that the principle
that I'm sorry the principal function of the miners was considered
to be the hash calculation.
LEPAGE, LUKE Further to this principle function was considered
an individual function per the terms of heading 8543.
LEPAGE, LUKE Again, Carl did a had had some really good examples
of what hash calculation is.
We're just gonna dive back into it again, just so we can kind
of understand it, hopefully as well as can be expected.
LEPAGE, LUKE Short form hash calculation.
That's the way that the miners collect the Bitcoin or other cryptocurrency
to get a little bit more in depth.
The hash calculation is a process by which mathematical puzzles or counting
or solved.
LEPAGE, LUKE And they're generated by the embedded algorithm algorithms
this generates or discovers the coins.
What you're trying to do with your minor is to be the first to solve the puzzle.
If you are, you are awarded the discovered Bitcoin
and other cryptocurrency.
The process also verifies that every transaction made is authentic
and aggregates it all into one certified blockchain.
LEPAGE, LUKE This prevents double spending of the collected coins
and ensures that you keep the coins that you accumulate.
LEPAGE, LUKE To reiterate, this functional process was found
to be the principal function of the crypto miners.
LEPAGE, LUKE OK, so now that we have defined the principal function
as being that of past hash mining, how does that relate
to the individual function in terms of the 8543 criteria?
Think back to the definition from the explanatory notes
that I detailed earlier.
LEPAGE, LUKE First part of that definition asks whether
or not the function is performed distinctly and independently
of another machine.
LEPAGE, LUKE Is that the case here?
Remember, from what we discussed earlier, the miners have to be attached
to the computer in order to function.
They do not qualify within this part of the head.
LEPAGE, LUKE The part of the definition, I'm sorry.
LEPAGE, LUKE However, there's another part to this.
The second part of the definition states that if it is mounted on A
to another machine, it must have a different function
and not be integral and inseparable.
LEPAGE, LUKE The miners are performed performing a hash calculation function
which is not the same as the function of the AP machine and it is connected to.
LEPAGE, LUKE Beyond that, dysfunction is not integral or inseparable
from the function of the computer or the AP machine.
The computer does not need the minor in order to function, so the minor fails.
The first part of the definition of 8479, it meets the second part
and can be considered as having an individual function.
LEPAGE, LUKE The final criteria for inclusion in 8543 is
that the good must not be provided for elsewhere.
Again, as I stated earlier, this is expanded to me in anywhere else
in the tariff, not just in Chapter 85.
LEPAGE, LUKE If it detailed examination
of the terror pettings is completed,
then you would find that hash mining calculation
or crypto mining isn't referenced anywhere else.
More specifically, it doesn't meet the definitions as set forth for inclusion
within heading 8471 or 8473.
As Carl discussed earlier.
LEPAGE, LUKE It's a nice little flow chart of how we got
to where we are is the good electrical clearly, yes.
LEPAGE, LUKE Does it have an individual function
as we explained earlier, yes it does.
And finally.
LEPAGE, LUKE Is it not provided for elsewhere?
It is not.
LEPAGE, LUKE Because of this, we can classify the miners
within heading 84 eighty 543.
LEPAGE, LUKE To drill this down a little bit further,
within the particular subheadings, you'll see that there isn't a subheading
that fits the technology we would place these minors under.
The all other subheading of 8543, seventy 9860 at 2.6%.
Just a note that the last four of this classification changed
in the 2022 tariff.
LEPAGE, LUKE Prior to then, the classification
would have been 8543 seventy 9960 with the same duty rate.
So if you're reviewing past rulings and see a reference
to this 10 digit classification, you won't be confused.
LEPAGE, LUKE Just wanted to touch briefly on parts of crypto miners
and how they would relate to classification.
LEPAGE, LUKE As you can see on this slide,
there are multiple subheadings devoted to the parts of goods
within heading 8543.
They are broken out by what they are used for and
in one case whether they are printed circuit assemblies, fewer presented
with a part of a crypto miner.
It's important to examine exactly what you have and how it functions
within the minor.
As you can see.
LEPAGE, LUKE Here the first part
of the parts goes physical vapor deposition,
apparatus assemblies and sub assemblies were flight data.
So not either of those.
Then you get in the other.
As you can see under other it's broken out into printed circuit assemblies
and other parts.
So knowing exactly what you have and how it functions is important.
LEPAGE, LUKE Uh.
LEPAGE, LUKE Carl mentioned the ASIC boards in pretty in in in depth,
so I'm not gonna go too deep into what they are.
LEPAGE, LUKE I just wanted to mention that if they are designed
for mining only, as you can see, this is clearly a printed circuit assembly.
It's a printed circuit board with all of the ASIC chips along the top.
LEPAGE, LUKE This would be considered a PCB part
for the minor under 8543 ninety 68.
LEPAGE, LUKE Another thing to keep in mind is that heading 8543 does not have
an accessory provision.
It only includes parts.
We've recently seen some items that are used in conjunction with minors
that would not be considered parts.
LEPAGE, LUKE Remember that these units use a ton of power
and generate a lot of heat,
so the accessories may include cabinets and stands,
fans and other storage devices.
These would have to be classified, but they're function name
or constituent material, regardless of the fact that they are meant
to be used with a minor.
LEPAGE, LUKE For more questions on this, I recommend reaching out
to your center representatives or the NIS office that may handle that item.
You could also reach out to me or or Carl and we could kind
of help you out along the way with how to best classify that.
LEPAGE, LUKE So why does it all matter?
LEPAGE, LUKE Obviously, we always want to try to be as accurate
and complete as possible in our classification, but beyond that 8471
and 8473 are duty free provisions.
While subheading 8543 Seventy 9860 is dutiable at 2.6%.
LEPAGE, LUKE Also, both are subject to 301 revenues
out of China under 9903 eighty 802.
LEPAGE, LUKE Here's the webinar link.
Again, I know.
LEPAGE, LUKE Coral also put this on there.
LEPAGE, LUKE But I wanted to make sure that everybody had a chance
to to copy it down.
So here it is.
I think it things should be posted in the near future on here.
There's some Inns and outs that have to be done, but hopefully hopefully
in the relatively near future, these should be posted.
LEPAGE, LUKE OK.
LEPAGE, LUKE Here's all of our contact info.
Email is always the best way to get in contact with all of us.
My office is also assisted by national import specialist associate Howard Sue.
He's actually out at present at training, but we'll be back shortly.
He's very knowledgeable, so in the event you can't get in touch with me,
feel free to contact him.
LEPAGE, LUKE Again, Carl put Dee Millman on his.
She's also great feel for you to contact her of Carl isn't available.
LEPAGE, LUKE Uhm.
LEPAGE, LUKE If you have any questions,
feel free to put them in the side.
We'll be on here for a couple of more minutes.
Umm, if not, I wanna thank everybody for taking the time to listen
to our presentation and again feel free to reach out if you need anything else.
LEPAGE, LUKE OK.
So really quick, we do have one question.
LEPAGE, LUKE A quick where can we find a good definition
of part versus accessory?
LEPAGE, LUKE It's a really good question.
There are.
LEPAGE, LUKE There are court cases that that, that dig into that
and there is.
LEPAGE, LUKE There are notes that also also handle it.
The key the key is that.
LEPAGE, LUKE Can it be used a?
Is it specifically designed for one machine and if it is?
LEPAGE, LUKE Can that machine or item work or or function without it?
Is it critical to what?
LEPAGE, LUKE To what it is.
So if you want something a little bit more concrete, please feel free
to reach out and I can I can form,
formulate my thoughts a little bit better
and could you something a little bit more concrete on that.
LEPAGE, LUKE Can you show slide 42 from Carl's presentation?
I'll stop sharing mine right now and of Carl,
you wanna pop years up again you you can.
MOOSBRUGGER, KARL OK, I'm trying to.
MOOSBRUGGER, KARL There it is.
MOOSBRUGGER, KARL OK, here is slide 42 of my presentation.
MOOSBRUGGER, KARL And also there was somebody?
Addie asked about the.
MOOSBRUGGER, KARL Would like the definition of a hash.
MOOSBRUGGER, KARL I will go back to that in a second.
MOOSBRUGGER, KARL OK, here is the slide for hash.
So a hash is like.
MOOSBRUGGER, KARL 1 hash per second would be 1.
MOOSBRUGGER, KARL Number that your device.
MOOSBRUGGER, KARL Guesses for the blockchain,
but these machines nowadays are measured in mega or gig or terahash.
MOOSBRUGGER, KARL Umm.
MOOSBRUGGER, KARL There was a part of my presentation
where I talked about the current ASIC miners are doing like 50 Tera hashes
per second, so we're definitely talking like you know, millions of numbers
that are guessed.
MOOSBRUGGER, KARL That's all I have for that.
MOOSBRUGGER, KARL Any more questions?
MOOSBRUGGER, KARL And 80P of 84, seven one free programmable.
Ohh, that is the cornerstone of my presentation.
MOOSBRUGGER, KARL Sorry, I find it really fast.
MOOSBRUGGER, KARL There we go.
MOOSBRUGGER, KARL So free programmable machine.
MOOSBRUGGER, KARL Let me go back one slide.
MOOSBRUGGER, KARL The best place to start to figure out
if your machine is free to programmable is to look at the Optrex case.
The Optrex case defined the freely programmable provisions by same machines
that operate on fixed programs are not classifiable if for 71.
MOOSBRUGGER, KARL I talked about the user and what they should be allowed
to do with their ADP machine.
If it's freely programmable, which is adding and removing programs, and.
MOOSBRUGGER, KARL And changing the operating system, things like that.
So then later on down the road, we have headquarters really 952862.
MOOSBRUGGER, KARL And that talked about.
MOOSBRUGGER, KARL A freely programmable DP machine
and how they are general purpose machines and their purpose is
to conduct operations like word processing, database management.
MOOSBRUGGER, KARL You know, I think even video games was mentioned
on their payroll and general Ledger, so.
MOOSBRUGGER, KARL Is like a combination of.
What is what give makes the machine for the programmable
and it you would just marry up pop tracks.
The tenants of Optrex with the descriptions put down
in this headquarters.
Really internets.
Really.
How we define what or how a machine becomes really programmable or not.
MOOSBRUGGER, KARL Slide 26, here is slide 26.
MOOSBRUGGER, KARL This is a description of the experience
where notes for AP System ADP systems consist of a central processing unit,
which is like your desktop.
You have the box where the processor and the motherboard and all that.
MOOSBRUGGER, KARL And 80 system has an input unit
such as a mouse or keyboard and an AP system has an output unit
such as a monitor.
So there is a small little variation that I did not mention
that says the number 2 and #3 the input and the output can be combined
into one single unit.
So you really you could have.
MOOSBRUGGER, KARL Like a.
MOOSBRUGGER, KARL A desktop computer.
MOOSBRUGGER, KARL And a touch screen monitor
and that would satisfy both the input and the output as well as the processor.
MOOSBRUGGER, KARL So that is in a nutshell that is.
MOOSBRUGGER, KARL What an 80P system is.
MOOSBRUGGER, KARL Video versus mining.
MOOSBRUGGER, KARL Can you really tell them apart?
Well, here's the here's the problem with that.
This is goes out to Mario.
MOOSBRUGGER, KARL So for the most part.
MOOSBRUGGER, KARL A GPU is is a part of an AP machine.
OK, it is the graphics processing that is inserted into onto the motherboard
and you would connect your monitor up to that
and it really runs the higher end graphics processing.
So what happens is.
MOOSBRUGGER, KARL Because the processing power
of the GPU is really well suited to generating or the function
of generating all these random numbers, right?
MOOSBRUGGER, KARL Somebody along the way figured out that hey,
GPU's are really good at mining, so they've repurposed
the graphics processing unit to do mining functions.
But it doesn't really change the fact that it's a graphics processing unit.
So the only way that it would be classified.
MOOSBRUGGER, KARL Differently than an 80P part and 8473 would be.
MOOSBRUGGER, KARL Two reasons, one being that it was.
MOOSBRUGGER, KARL It was installed inside of a mining machine.
OK, if you have a a box with a a controller board
and 10 GPU's mounted in it, OK, you're not gonna.
You know, that would no longer be a GP board.
And then the other reason would be.
MOOSBRUGGER, KARL Umm, it's been altered or specialized in some way
that it doesn't operate as a GPU anymore.
Now it operates as a.
MOOSBRUGGER, KARL A mining.
MOOSBRUGGER, KARL Algorithm hash generator for lack of a better word.
So that's.
MOOSBRUGGER, KARL A GPU is always going to be 8473 unless it's inserted
or installed in inside of machine.
MOOSBRUGGER, KARL And then it's classified with machine
or if it's been altered.
MOOSBRUGGER, KARL To the point where it's no longer considered.
MOOSBRUGGER, KARL A graphics processor but now has
to be considered a mining.
MOOSBRUGGER, KARL I hope that answered your quest.
MOOSBRUGGER, KARL OK.
MOOSBRUGGER, KARL The presentations will be available shortly.
I think for the external people, there's some things that have to happen.